to read a hydrometer, you sanitise it, and drop it into your bucket of beer... you read a hydrometer by the level the wort/beer line comes to on the stem. bare in mind that water/wort/beer has some elasticity and you'll see it "clinging" to the hydrometer stem... you read it to just below this clinging/elastic effect, which i've learned to be about half a hydrometer point.
hydrometers work in reverse order... the more alcohol you have, the deeper it sinks, so that's why the numbers are higher at the bottom of the hydrometer than the top. pure water has a gravity of 1.000 when sugar is added to the water, it displaces the hydrometer, making it float higher, and therefore giving a higher "gravity". for example, if you have two lots of wort, one at 1.040, and one at 1.050, the one with 1.050 has more sugar in it, and will ultimately have more alcohol because there's more sugar in it to ferment
the marks on the hydrometer are set to two points. so if your beer line is one mark higher up the hydrometer that the 40 line, then your gravity is 1.038
hope this helps.
any questions, feel free to hollar... i'll be here most of the evening