I have used Versions, but I prefer Cornerstone 2. It is a much more robust client.
A repository is a folder stored on a computer (local or remote.) It contains all the data regarding the version control of a set of files, stored in a data structure that most people don't need to understand.
A working folder is a folder on your local system that contains a copy of the files that are stored in the crazy data structure that is the repository.
So, if you have a local repository, that folder is stored on your hard drive. You should never need to access this from the Finder or the Terminal, or well, through any means whatsoever other that through your SVN client (Versions).
In order to work with the files stored in that local repository, use Versions to "Check Out" a working copy of the files. These files will go into a second folder somewhere on your filesystem. These files you can access directly using whatever application floats your boat. After making changes to the files, you go back to Versions and check the files into the repository. This action creates a second version of the files within the crazy data structure that is your repository.
Using Versions, you can then move back and forth through these various versions of your files. Whatever version you want to work form is then loaded into your working copy or you can check out a second working copy if you want to work with a different version of the files, while keeping your current working directory as well.
Here is how I arrange my SVN repositories and working directories.
First: The repositories are all stored in ~/svnroot. I have a couple of types of projects that I use SVN for, so the structure looks like this.
etc etc etc
Keep in mind that in each example above, the last part of the path above is the actual repository.
Second: Then I create working copies of these repositories. I keep those in the same structure in my home directory. It looks like this.
etc etc etc
Note the absence of the svnroot directory in these examples... Also, keep in mind that the last part of the path above is the directory that is under version control, otherwise referred to as the Working Copy. These are the files you can edit to your heart's content.
Then, to keep things organized, I create the scripts and documentation directories in the sidebar of Versions and put the entries for the working directories and repositories in here.
I will try to remember to provide a screenshot when I get home tonight.
Third: Now, put the files you want under version control into the Working Copy folders in the Finder. Back to Versions and check the files into the repository. Now you are all set and should be able to work.
Versions does not generate tags, branches, and trunks. If you want to use them in your project, create each folder in the Working Copy, and then check them into the repository. In order to create a tag or a branch, you will want to check the Versions website. Their help documentation covers that item... and it needs to be done in the repository view, not the working copy view.
Oh, and "Bookmarks" is just the term that Versions uses to keep track of your repositories and working copies in the sidebar of the main window.