Originally Posted by
operator
Sorry, this sounds like a load of bull**** to me. You definitley do not want loose like you are describing if you're on the road. You'll drop the chain with nearly every bump.
OP: Read this on how to set your rear wheel correctly with the proper tension.
http://www.sheldonbrown.com/fixed.html#tension
The shake 'n' bake test is to verify that it won't come off. It's done with the rear wheel spinning 15-20 mph, if that wasn't clear. Racing 30+mph in a tight pack with a buncha guys without brakes, it is essential that the chain doesn't drop. This test ensures that.
The poster above who used the words 'centered in the rear triangle' is assuming that the frame is straight and the wheel is perfectly dished. That may not be the case. Try putting the rear wheel in without the chain on, then run string from the cog to the chainring to check alignment. Move the wheel around until it's right, take a note of the wheel's position between the stays, and repeat that position with the chain on, and properly (de)tensioned.
FG riding should be a happy, smooth, and silent experience. It's been that way for me on track and road for over 20 years. Good luck!
Mel