Help

[tigarlilly.livejournal.com]

I just got the round Knifty Knitter set for my birthday Sunday. I'm at a total loss. I can't figure out how to do what they show in the pictures. The knitted part in the middle. I keep going around the loom and it just fills up my pegs. I'm sorry if this sounds dumb, I'm a total newbie at this. :\ Any help at all would be great. I really want to make a hat. I've read so many places that it's super easy, but I'm stuck and my awesome birthday present is starting to rustrate me. :(
Here's a website I was looking at.
http://www.bevscountrycottage.com/how-to-loom-knit.html

(the picture I'm talking about is under step number 4. All the knitting in the middle. Mine are just going around the loom. I dunno what I'm doing wrong. )

Thank you!!!!