Can someone explain to me how shorting with options works?

Is this correct?

Let's say SPY is currently at $100. And let's say I think SPY is going to go down 25% between now and December 2009... (if I am reading the options chart right), an option costs $0.06 (ie, 6 cents) for a December, 2009 strike price of $75.

So, if I want to short 100 shares, I will have to pay six dollars (100 shares * $0.06). Correct so far? (Not sure what that 0.06 means...)

If I am right and SPY goes down to $75 or lower by December 2009, I will make $2,490:

$100 - $75 = $25
100 shares * $25 = $2,500
$2,500 - $6 = $2490

Is this right so far?

If so, how does the process actually work? Do I have to actually buy 100 shares and hold them for the period of the option? Then if the price does go down below my strike price, I would then sell them for $100 each and pocket the difference? Or does it work some other way?

Sorry for the dumb question but I'm just not quite sure how this works!

Thanks in advance!