To set the GMT hand, unscrew the crown and pull it out to the first stop (not the second stop where you set the time), and turn it, one direction will set the date, and the other direction will move the GMT hand. To be functional what you should do is set the GMT/24 hour hand to the current time (i.e. if it is 1:00 PM, set the GMT hand to point the the on the Bezel (make sure that the Arrow is at the 12:00 position)), which from the pictures appears to be set correctly.
The idea behind the original Rolex GMT watch is to be able to quickly read Greenwich Mean Time/Zulu time for pilots. Aviation relies on GMT to get everybody on the same time and prevent errors in coordinating local time zones. Here is a website about GMT use http://fejack.net/misc/gmt24/gmt24.htm
I've always set my watches to the local time (12hr and 24hr hand) and then used the bezel to find my GMT time. I live on the West Coast, USA, and depending on Daylight Savings Time we are either -8 or -7 hours off from Greenwich England, so I would move my bezel to either 7 or 8 and read GMT/Zulu from where the 24 hour hand pointed on the bezel...
Hope that helps and isn't too confusing