Menus allow you to edit the menus in the site. Here is how you get to the menus section of the admin.
Adding existing pages to your menu is relatively straightforward. Drag menu items to make them sub menu items. In your primary menu, this will add these items to the drop down. Don't forget to save when you're finished!
Custom links allow you to add items to the menu that don't exist as pages on the site.
Menus can also be used on pages via the "Custom Menu" widget.