There are different kinds of ink for different purposes. Permanent ink is great for when you want to colour in stamps with water based pens. Pigment ink is slower drying and is used for inking edges of card and heat embossing.
I use the small Papermania inks, four in a box, shades of the same colour. They are cheap and because I don't do much stamping, but I colour card with them, they are great value for money.
Yes you need sponge to ink with!! Use the cut and dry foam or there is an inking pad holder thingy you can buy which has separate pads, you can also buy packs of the pads.
Dab the pad in the ink and then start from your craft mat or cutting mat and gradually work around the edges of your project. You can use the inks direct but its hard to get rid of the straight lines the inkpad leaves on your work.
Hope thats some help!!