When you talk on SSB, you produce radio energy of a range frequencies that is as wide as your voice is, keeping in mind that the transmitter will only transmit as wide as it is designed (or set) to. If you transmit a single tone over the microphone (same SSB scenario), you will produce radio energy at a single frequency. PSK is Phase Shift Keying, PSK-31 uses two tones very close together (+/- 15Hz) from the center transmit frequency. You can hear this in the 30 Hz warble (frequency change) when you listen to it.
The waterfall shows the whole audio passband of your soundcard, 30-100 hz to 18-25khz. This varies in the quality of the soundcard and such. The transmitter will only produce a tone within it's transmit passband, typically 2.5 to 3 Khz wide. So you set things up in the software so your waterfall is as wide as your transmitters passband. Then you can transmit or "decode" (receive is wider than decode, it's the whole waterfall) anywhere in that width by clicking on a spot in the waterfall.
Hope that helps.