Attaching yarn/picking up and knitting

[Kirochka]

I'm doing the knit-down pullover from Sally Melville's The Knit Stitch and just finished the front... I bound off the bottom and cut the yarn... and now I'm at the part where I'm supposed to pick up and knit stitches at the shoulders so I can do a three-needle bind-off.

So, there I go, reminding myself how to pick up and knit... and I'm supposed to take the right needle, insert it, wrap the working yarn...

Which is where I come to a screeching halt. WHAT WORKING YARN???

Am I supposed to attach yarn? Which, incidentally, is a mysterious concept I sort of worked out when I was making the Tank Girl tank top from Stitch 'n Bitch this summer, but it seems to be something no one really stresses... how to do it right.

Help...!