Stop Loss = Order placed to get you out of a trade that goes against you to guard against runaway losses. This is normally a "stop" order.
Take Profit = Order placed to exit a trade once it's reached the price objective you have for the position. This is normally a "limit" order.
Stops and targets should be determined by your trading strategy, not just some made up number. Test, test, test.
As for when you place a stop - if you are long then the sell stop should be below the current market price, while if you're short then the buy stop must be above the current market price.