You're confusing game saves with save states.
First of all. READ THE MANUAL. RTFM
Second, game saves are the normal saves that games save when you are actually in the game and, through the game, you choose to save the game.
Save states are special. They are emulator specific (not used by the regular console). They allow you to, through the emulator, save the state of the game at that point. This is the equivalent of pressing F5, or Save. To load from an existing save state, press F7. To switch between different save state slots, press any of the keys 1 through (or maybe 0-9; I'm not positive and I am too lazy to check).
Save states are an artificial and much less reliable form of saving than regular game saving that the games were intended for you to use. Save states are instead used for you being able to warp to different parts of the game that you've saved at and to be able to rewind and try something again, without the game knowing that you did it.
In a way, save states are cheating if you're trying to play N64 games for real. But if you've played these N64 games before, and possibly beaten them, or just plain don't care, then save states can serve really useful. Especially in games where the developers think its fun for you to have to start over for things you "fail" at. -_- Just press F5 after you accomplish something huge that you don't want to lose, and also press F5 before a big event that you think you might lose against. Press F7 to go back to that save state.
And ALWAYS remember to save your games NORMALLY as well. You can never trust save states to hold all of your work. For example... let's say, when you start up the game, normally you press F7 to go back to the part of the game of where you were before. But let's say, when you start up the game, you accidentally press F5. Whoops, there goes all of your progress of the ENTIRE GAME.
Also, save states often crash the emulator when you use them in succession too quickly. And they get corrupted easily.
Many of these crashing/corruption bugs have been improved with PJ64 1.7, however.