Great responses from both! Thanks. I understand it clearly now. I tightened it hand tight and backed it off so it spins freely. I've proceeded to the rear rim now but it looks like I'll be needing a special tool. The rear cogs I think are held on with what looks to be a two notched setup. I thought the two holes on the face where it says Shimano would be a good spot for a pin wrench to remove it but it doesn't want to turn that easy. After reading I don't think you even are supposed to use a pin wrench or those two holes for removal.

Will I be needing this special tool to get to the rear bearings? I could get the local bike shop to remove it, but then I would need them again for re-assembly...