"Theater" can mean both, Wendy, but "Theatre" is considered more distinguished or cultured, or something to that effect. Movies are not distinguished, but plays can be. So, some playhouses will use the alternate spelling, for atmosphere, or to try to create atmosphere.
In (written) conversation, "theater" can again refer to either, but "theatre" will generally, if it is used, refer to a playhouse.
That's my understanding, anyway.
Paul
