Help with understanding hat pattern

[alison0313]

Hello all -

I'm attempting my first ever hat, and my first anything on circular needles. I'm following Edith's Noro hat pattern from the DIY website: http://www.diynetwork.com/diy/lb_bed...276410,00.html

I'm nearing the end of step 1, but I'm not really understanding step 2 and 3.

2. Knit 2 stitches together across the next 2 rounds. Remove marker and cut yarn, leaving a 10" tail. Thread tail through a yarn needle, remove stitches from needle one at a time. Pull thread to gather up all stitches.

3. Fasten off.

Am I doing k2tog for the entire 2 rows, or just once at the beginning of the row? If its the entire row, wont row 2 be really tough to knit? Next, what am I doing with the gathered stitches after I thread them?

Its probably very simple, but I'm just not picturing it very well Any help would be greatly appreciated!

Alison