confused about adding Windows 7

I am about to add Windows 7 to my iMac. I also have Parallels to add.

My confusion is whether (1) to do a partition of my iMac hard drive first and load Windows 7 to that partition, and finally then to load Parallels or (2) to load Parallels first and then add Windows 7 to it as a virtual machine.

I did not find in the Parallels' manual a discussion of what to do when you have Windows 7 already on your iMac, only how to add Windows 7 once Parallels is in place.

I may be confused even as to my terminology above.