The song must be put into your iTunes library from a CD or downloaded off of the internet. If you buy it from the iTunes Store it's protected from being used in your video because it's technically copyright infringement.
Initially start a new project and pick a theme and select a clip.
Then click the insert button. It looks like an empty square with an arrow pointing down. It will default to video. At the bottom of the screen you should see Video, Photo, Audio. select Audio and pick something from your play list.