It's okay. Relax. Your pattern seems to be written for someone who knows what they're doing already. But, we'll get you through it.
First off, put all of your heel turn stitches on one needle with the working yarn coming off of the left side of your work (if you are looking at the RS of the work, you've just finished a knit row and the working yarn is on the left side of that needle).
Now, remember how I said that by slipping the stitches on each edge you are making a nice big stitch for you to pick up stitches in? That's what your pattern is referring to as the selvedge edge. Using the same needle that has all the heel turn stitches on it, pick up one stitch in each of these stitches going down the side of the sock (this is called the "gusset"). If you haven't picked up stitches before I really encourage you to watch Amy's video on this site. It will make sense to you and she will show the proper way to pick up the stitches under the 2 strands of the stitch (not just one).
Once you have picked up all the stitches on this needle (needle #1 and also, make a note of the number of stitches you have picked up not including the 10 heel sts.), take a new needle and knit across your instep stitches on your #2 and #3 needles (or if you've put all the instep stitches on one needle, knit across needle #2).
Now, with a new needle you are going to pick up the same number of stitches that you picked up with needle #1, but you are going FROM the instep TO the heel. Once you have picked up the same number of stitches, knit half of the heel stitches (5 sts) onto that same needle). The beginning of your round is now in the middle of the heel and you are ready to begin the gusset decreases.
You mentioned a better pattern for a newbie. I'd refer you to Silver's Sock Tutorial http://www.cometosilver.com/socks/