Ibook specific boot problems

I am new to mac and was given an ibook for free by a friend. I took it to the apple store and the tech said that all it needed was a new HD. SO I bought a Western Digital 80GB for the ibook and had it installed. Now when I turn it on, it flashes the infamous question mark file. After a few seconds it switches to the smiling computer face. Then it freezes. I have only have one OSX 10.2 install CD.

First question- What is the smiling computer?
Second- How can I format the new HD?
Third- Why would it be freezing?
Fourth-How can I get it working?

Any help that would be great!

Mac N00b

Thank you so much for responding!

Ok I tried booting up the ibook with the CD in the drive while holding down the "C" button. It turned on and showed a blank grey screen. All the while the CD was spinning and "sounded" like it was trying to work. After a minute or two, the spinning stopped and the grey scree nwas still there. THe only sound was the fans rotating. Any suggesstions or is my ibook trash? Thanks!