Mapping Sub Domains

G’day

I am a bit confused with all the examples and instructions.

I own a domain http://www.ozguyz.com and have website which I want to keep and want to make my blog melbournelocal.wordpress.com a subdomain of it.

#1. I think I need to make the blog a subdomain as: melbournelocal.ozguyz.com on my cpanel of my ozguyz site?

I have been follwoing these instructions in:
http://en.support.wordpress.com/domain-mapping/map-subdomain/

and if the above is correct not sure what to do next? I am also confused as to what adding a Cname record is in these instructions?

I think somewhere after #1. above I need to get a mapping upgrade?
and load word press to a subdirectory at http://www.ozguyz.com but would appreciate someone steering me back on the right path and step sequence.

Many thanks
Mike – Melbournelocal