Right, you'll need the OS 9 CD for SheepShaver. (I think 7.5 or 8 would work, too.)
You can install more than one OS on your Intel Mac, but not Mac OS 9. Mac OS 9 is a PPC-only OS, so you can't install it on Intel hardware. Similarly, on PPC Macs, you can install Mac OS 9, but not Windows or other Intel-only OSes.
As for how to use SheepShaver, as I mentioned before, I've wrestled it with it at length and gotten no usable results. So I can't really help you there. You might want to check out
http://www.emaculation.com/phpBB/viewforum.php?f=20 (although most users there are not running SheepShaver on OS X, it's still a good resource).