basics of dns management: how to map a domain name

Hi folks, I'm finding a lot of info about setting up DNS (both on linode and elsewhere), but I'm confused how to put it all together.

What confuses me is: let's say I use the Linode DNS manager; how much do ns1 and ns2.linode.com know about my IP automatically?

I see the following possibilities:

1) linode's nameservers know my IP, so when I add a "domain", they automatically map my IP to the domain name I enter.

2) I have to configure my own nameserver to map my IP to my domain name, and linode's nameservers just point to my own nameserver.

I'm guessing it's possibility 1), but which records do I have to define in order to complete the mapping?