Hi. Generally speaking it's a good idea for the yarn to be in a ball before you knit with it. A hank of yarn will end up a tangled, snarled mess very quickly. You can start from the center or the outside, your choice. If your yarn has red and black in it, then it's a multicolor yarn. Do you have a particular project in mind?
Happiness is catching that dropped stitch while it's still fixable..