Ok, I think you may be a little confused, but let me try to help you out. First off, your .htaccess should be something like this:
AuthUserFile /path_to_your/.htpasswd
AuthName A_Cool_Name
AuthType Basic
<limit get post put>
require valid-user
</limit>
Now, you may be asking...what the heck is .htpasswd. Well, this is something _you_ dont modify, a program does that for you.
Run this command:
htpasswd /path_to_your/.htpasswd new_user
If you are doing it for this first time do:
htpasswd -c /path_to_your/.htpasswd new_user
The -c will create the file .htpasswd for the first time.
After you do this, it will ask you for a password for that user. Then, that user and that password can be used to access the area.
Every Dir and File under that Dir will be password protected by this list (but can be overridden by other .htaccess files in other dirs).
Hope this info helps