Yes, you are quite correct. You must buy your warranty BEFORE the one year standard warranty is over. Note however, that certain states have speical provisons that might affect this. For example, in California, if your notebook has to go in for repairs, the time it takes to complete the repair (assuming it's greater than one day) is added onto your total warranty time. EG:
Purchase on 8/12/2007
Go in for repairs on 9/1/2007
Receive notebook back on 9/6/2007
Total Repair time: 5 days
Applecare expiration date: 8/17/2008.
Again, I only know this is so in California, other states and countries, you're on your own.