You put in the address of your website - that is your target URL. They aren't creating a website for you, you are putting in the address of an EXISTING website.
And then they create a new URL. So when you go to the new URL, it forwards to the Target URL that you entered.
So if I had members.aol.com/dskjfdfjl/main.html as my website, I would enter that into the box, and they would give me a new URL that's shorter and easier to remember (or that's the concept, anyway).
