File > Document Setup... What you enter for a size here is the dimension of the page. Margin settings put the guides for your margins the designated amount inside the page size you set here.
Get yourself a good book, like Sandee Cohen's Visual QuickStart Guide to InDesign, or sign up for Lynda.com training.
You can change the units used by clicking on either the Edit Menu (Windows) or the InDesgin Menu (Mac) and selecting Preferences > Units & Measurements. Change the setting here and your problem shall be solved.