The Mac OS X CDs
The Mac OS X Reinstall/Boot CD's that came with your computer are for maintanance only. If you for some reason need to reinstall your computer's operating system. you will use these disks. Also, If you want to repair the main startup disk (Macintosh HD) you need to start up into the CD. To do this, you only need the first Disk (labeled 'iMac Mac OS X Install Disk 1'). To start up into this disk, restart te computer and hold down the C key right as the computer is starting up (when you hear the startup sound).
To use an external disk, all you have to do is connect it to the computer via FireWire or USB 2.0. Your Mac will automaticalyl detect it and mount it on the desktop so you can put files on it. If you are planning on getting Mac OS X Leopard when it comes out, you can use your external disk for the Time Machine backup.
Happy Maccing!