If you want to put your logo in place of the website name, you'll want to open includes/template_top.php and/or includes/template_buttom.php and locate <div id="website_name"></div>. Simply place code to display your store's logo in place of the php that displays the store's website name. If you need to tweak positioning, edit the corresponding code in the stylesheet.
If necessary, you can work your logo directly into the template image using the PSD, as well.
I have no idea what to put in here. Do I have to have to logo hosted in something like photobucket to upload it? I have no idea.... I'm rather thick & still learning.
<div id="website_name"><?php echo '<a href="' . tep_href_link(FILENAME_DEFAULT) . '">' . STORE_NAME . '</a>'; ?></div>