1 An engine wants to run with a 15% mixture of air and fuel. So (Approximately) 85% air to 15% fuel. If there's too much fuel, the mixture is "Rich", not enought fuel and the mixture is "Lean".

Note: Running an engine Lean can cause damage!

2 As you close the needle valve, the mixture will lean out from its present state, and it will go up in RPM. Once it peaks, back it off a few clicks. Then, point the nose of the plane straight up. There should be a slight increase in RPM. If the RPM goes down, it is too lean.

3 A Needle valve is just that... A needle that goes into a hole to adjust the fuel flow (See Pic)

4 They are probably just listening for anything unusual

5&6 There are mant factors that determine the "target" RPM. Engine size, prop size, type of flying you do etc.