Prototypes
Prototype web sites are simplified versions of the web site. They have a basic information architecture, but they do not contain all of the graphics and styles of the final product. It is essentially an interactive wireframe mock up. The functionality of certain features and work flows are built and tested at this stage. There are many software packages that help in creating prototype web sites.
The example below is not a working prototype, but it shows how simple they can look. This one is based on the Home Page wireframe for the web site you are using now.
How Things Work
Some designers build paper prototypes of their sites. I think it is just as fast to build prototypes in the computer and test them on the web. An advantage to doing it that way is it allows the web developers to test technical feasibility of certain features we are designing into the site.
Where Things are Placed
For a brand new web site I like to start with a simple black and white design. Then, add color gradually. This lets us concentrate on where the user is looking on the page to find things. Simple hover states using background colors and text color changes can be created if that level of detail is needed.