Basic Knitting Questions

I'm working on the Bombshell sweater from Big Girl Knits and I have a pair of really basic (as in, I really ought to know the answer to these) questions.

First, when it says to "transfer stitches to waste yarn," am I just threading the stitches on the yarn somehow (e.g. with a darning needle), or am I knitting them onto the waste yarn?

Second, how does one work short rows when knitting stockinette stitch in the round? Do I just turn my loop around so I'm knitting at the back of the loop? Do I purl back or continue to knit all the time?