I think you're getting confused between the SCREEN size and the SCENE size.
Your screen size will probably be 480x320 which is the size of an iPhone. That's all your iPhone will be able to see at any one time. However your scene can obviously be a lot bigger, so that you can progress through it. So in the catapult game, your screen will still be the same size, but your scene will be a lot longer. When you shoot a bullet thing, the camera follows it along the scene.
My guess is you're trying to create an intro scene, like a menu or something? Keep your screen size exactly the same in your settings, but when you click 'Create New Scene', make sure your scene size for the menu is 480x320, because otherwise it will look strange. If you click the 'tiles' drop down and change it to 'pixels', it should make more sense.
Other than that, I don't really get what you're on about, it's not well explained?