when you buy a chip like the 168 (which is not retired, its just not most popular) unless it specifically says it has a bootloader, and cost nearly twice as much, its a blank chip. Think of it like a desktop computer with a blank disk in it, its just going to sit there and do nothing untill something tells it otherwise.
To get the bootloader on there, you need a programmer, and if you have a programmer you dont really HAVE to have a bootloader. The bootloader is just a little code that gets loaded when the chip first gets power, listens for a magic code over the serial port, and if it gets it programs the chip with your program, if it doesnt it just starts up whatever in there. (and yes it requires conversion to connect to a com port or a usb port on a pc, its not standard RS232)
Programmers range in cost and features from "make your own" if you already have an arduino, to a couple bucks on ebay, to over 100$ for development boards.
If I were you I would get something like an USBASP which runs 2-20 bucks, once you have that burn the bootloader (a simple menu option) which gives you serial programability and sets the chips fuses (options) for you. Again you dont have to use the bootloader, but you do have to set the fuses or else stuff is not going to work right ... and a couple clicks vs a big line of text in a command window you might as well install it.
edit: ack, just noticed you got the one with the bootloader if you bought it from sparkfun. In that case you can use the programmer above or you can get an FTDI cable / breakout board to program over USB (also available though sparkfun)