Need Help on "Furry Goodness Scarf"

After a suggestion from the KH group on ravelry, I decided to try to make this scarf. Problem is that it just looks like a regular ribbed scarf. Apparently, I am not doing the “Knit 2 Together without slipping sts from needle, then k first st again, drop sts off of needle,” part. Which stitch is the “first?” is it the one closer to the left or the one on the right? I’ve tried doing it both ways, and it hasn’t worked either way. I’m getting annoyed because the pattern seemed like it would be a simple one/ :??

pattern is here

The second stitch from the tip is stitch 2.

Put your needle into the two first stitches as if you are going to k2tog, but don’t slide them off. Then knit into the stitch closest to the tip and then slide them off.