Yes, it goes under your clothes. But theoretically you're putting things in there that you are NOT going to need to access while in public! (I.e. your passport for everyday bumming around. But keep it in your purse during actual travel, in situations where you will need to be showing it to customs officials.) I usually kept my plane tickets, rail pass unless I am using it that day, extra cash I know I won't (or shouldn't) be using, credit card, etc. Anything else just keep it in your wallet inside your purse/daypack. And speaking of that-- instead of a small backpack, I prefer to carry a small messenger-bag type thing with the strap that goes crosswise over my body-- it's smaller, it's right underneath me so no one can get into it, and it can't fall off my shoulder or get snatched. But that's just me.
I never kept anything in my money belt that I knew I was going to need access to throughout the day. And it's not at all a stupid question!!!