The easiest way to understand social networking is to think of it like high school.
You had friends in school, and you knew quite a few people even if you weren't friends with all of them, but it's likely that you didn't know everyone.
If you ever moved to a new school -- or if you can imagine moving to a new school -- you start out with no friends. After attending classes, you start meeting people, and as you meet them, you begin associating with those that have similar interests.