When I got my GPS, I took the REI GPS training class and thought it was terrific.
My Garmin GPS came with a lot of waypoints preloaded in the topo -- geographic features, man-made objects, etc.. When I use my Garmin GPS, I often use the preloaded waypoints to help track progress, get a sense of how much time will be needed to get to a location, how difficult the next section will be, etc. Of course, you can add your own waypoints, either ahead of time, or on the trail while you are hiking. I sometimes add waypoints while I am hiking to assist should I need to backtrack, but I have never had to use them. I have not bothered to add custom waypoints in advance of a hike because the topo they sell you for the Garmin GPS already has plenty in it.
I don't really use my GPS for backpacking anymore. On my recent trip, I used my iPhone, and didn't set any waypoints in advance of the trip. I did set some waypoints as we hit certain decision point locations, again, the idea being that those waypoints could help us backtrack if we needed to do so. We didn't end up needing the waypoints, but they created a sense of security. For navigation, rather than GPS waypoints, we were using obvious geographical features and the paper topo map.
If you want to get comfortable with waypoints, a great way to do so is by getting involved in geocaching. After I took the REI course, I used the skills I learned to try to find geocaches, and it was a lot of fun. In the process of doing it, I got pretty good at using my GPS. For geocaching, you often do enter coordinates into your GPS as a waypoint, and then use the waypoint to assist you in locating a cache. You can read about geocaching here.
http://www.geocaching.com/Interestingly, my experiences with the topo on the GPS ultimately led me to become more comfortable and confident reading paper maps. And since paper maps and compasses don't need batteries and don't break down, that is a good thing.
