A whammy bar is also called tremolo arm but adds vibrato to the sound (Hank sound). With a pedal you modulate the sound and add a Tremolo, which was used as you describe in The Last Laugh and this one, Wrong'un.
Vibrato is bending between two notes so to say while tremolo modulates the volume of one note, so to speak.
Guitar players please correct me when I am wrong (un) 
LE
You're pretty close! Tremolo is usually an effect in the amplifier that, yes, modulates the volume of everything you play a little bit. You can change the speed at which this effect is being used to match the tempo of the song. The best use of this effect, I think, is "Riders On The Storm" by The Doors, tasty guitar playing.
Tremolo is almost like cheating because with this effect, EVERYTHING you play suddenly sounds cool and badass, so it's easy to overdo this effect, I guess.
Also, tremolo is a classical guitar trick where you play a constant stream of notes with index, middle and ring fingers while providing a melody with the thumb, essentially making music "flow" like water. The best example would be "Recuerdos de la Alhambra" which pretty much imitates the water flow inside the famous Spanish palace. My favourite versions are by Chet Atkins and Kazuhito Yamashita.
Overall, tremolo is one of the most controversial terms in music. And I don't like that the term would stick to a whammy bar because it's really closer to vibrato.
