What the DVD does is upgrade to version 1.2, which is your starting point. You don't have to do anything for this to happen, as it's automatic as long as you have an internet connection running while you install, which you will need anyway. After you install and upgrade (auto-magically), you'll be free to play offline.
But that's where the FUN starts, because that's where you want to start adding the mods that really make this sim great. There are a ton of them, but I suggest you start here:
http://www.subsim.com/radioroom/showthread.php?t=190656
The rest is just learning the ropes, and that's what WE'RE here for!
