This is such a cute pattern. You're at the part where you're starting to knit the body of the dragon. The leg sts are going onto 2 dpns (just slip them purlwise off the holder onto the dpns) so that you can start to knit them with some cast on sts between them, forming the lower body.
5 (leg 2)-----5 (leg 1)
4 (leg 2)-----4 (leg 1)
You'll have the sts lined up like this on the back and the front needles and you'll knit them in order: 4 sts from leg 1 (cast on 4sts where the 4 hyphens are, 4sts and then 5sts from leg 2 (cast on 4sts), and 5sts from leg 1. Once you get the stitches joined in the correct order, I'd slip some to a third needle for ease of knitting in the round.
This is supposed to be a diagram of two dpns (slightly klutzy, I know):
dpn #1: 5 (leg 2)-----5 (leg 1)
dpn #2: 4 (leg 2)-----4 (leg 1)
Move the sts that are on the three dpns now onto just two needles so that there are 4sts on needle 2 and 5sts on needle 1. Line the two dpns up parallel to each other. Move the leg to the ends of the dpns so that the working yarn is at the tip of one of the needles. Then take the leg that's on a holder tand slip it onto the other ends of the dpns so that 4sts are on dpn #2 and 5sts are on dpn #1. That gives you 8sts total on the front and 10sts total on the back.
Once you have them lined up like this you can knit across 4sts of leg 1, CO 4sts, knit across 4sts leg 2, turn and knit across 5sts leg 2, CO 4sts, knit across 5sts leg 1 and then join to knit in the round.
Since it's not so easy to knit on 2dpns, here is where you can knit some sts onto a 3rd needle to make knitting the body easier.