Slab interior door too big & Help with interpreting a related TFH article

We bought a slab door to replace an existing interior door in our house. When we hung it (after chiseling out hinges and installing the doorknob), it is just slightly too large for the opening that we have. I found this article here: http://www.familyhandyman.com/DIY-Projects/Doors---Windows/Door-Repair/fix-sagging-or-sticking-doors/Step-By-Step  That leads me to believe I can probably fix it by sanding it down (we already tried adjusting hinges and pulling in the jamb). The article says: "Scribe the door. Set the pencil tip and compass point 1/8 in. apart and run the point along the jamb." How would this help me? What exactly are they saying to do? Is it just to make a straight line on the door?

One related question - if I sand it, it seems I always should do it on the hinge side, since we already drilled the door knob hole. Sanding the latch side would possibly cause the latch to stick out of the door even when the knob is turned. Does that sound right?

Any advice would be very much appreciated!

It's to my understanding that you have already installed the hinges and lockset ( door handle) but, when you go to close the door it hits the jamb.

If the door hits the jamb at the top....

Measure from the top of the door jamb ( where door abuts to) down to the top of first door hinge ( jamb side) and write that down. Measure from the top of door down to top of first hinge, this measurement should be between 1/16 - 1/8 less then the first measurement to allow the door clearance to shut. If the door still hits before fully closing, mark that spot where it contacts and either sand or shave about 1/32" from there to the end that is non closing. When the door is fully shut you should see a 1/16" to 1/8" clearance between the top of door and jamb.

If the door hits the jamb on lockset side....

Hold the door snug against the jamb, run your pencil down the jamb marking the door. This line will represent how much to cut off so the door will shut.

Note: Interior doors should have between a 1/2" - 3/4" clearance at the bottom for air flow. Bathrooms should have between 3/4" - 1" clearance at the bottom for air flow.