Yes, you just let the stitch called for drop off the needle and you want it to run down. Dropping the stitches also creates the shaping so that it gets narrower as you go up to the waist. The first time it tells you to drop one there is a little typo that makes it a little hard to read. It should say to drop the 12th st, not 12th sts. The (36) is just telling you how many stitches you will have left after you drop that first one.