Think of the 1/2/3 as "Low, Medium, and High" range and the right 1,2,3,4,5, (and possiby 6,7) as your actual "gears".
Start out in 1 and go up through the gears on the right grip. Do be aware that you don't want to go all the way up--look down and you will see how the chain moves--you don't want it to go all the way "left to right" as it leaves the front sprocket and enters the rear one. Although you have 18 or 21 "speeds" you don't actually use them all (some combinations are the same, anyway). You also want to make sure the chain is more-or-less centered and not riding on the shift mechanism.
Basically go 1-1, 1-2, 1-3 then move up to 2 and work through the next few gears then go to 3 as your speed increases. You can't (or shouldn't) try to shift under heavy pedaling so you need to "plan" your shifts for going uphill (basically getting into a lower gear BEFORE you actually need it).
Now that you're totally confused, give it a try--it's easier to do than to read about, I think.
47 M 5'8"
May 4, 2010...... 440? lbs. (Start FitDay Size 60 Jeans)
June 19, 2010.... 393 lbs. (First Weigh-in)
June 19, 2011.... 229 lbs. (164 lbs. gone in one year :-)
Current Weight... 185 lbs. (Size 36 Jeans)
Next Goal 169 lbs. (07/04/12)
Ultimate Goal 165 lbs. (12/31/12)
The best exercises for weight loss are Fork Putdowns and Table Pushaways.