Need some help with LED binary counter, not sure if it's hardware or software

Thanks Techone.

I've been going through the Bit Math tutorial and I'm starting to understand everything in your code but I noticed in your comments that you said I need transistors. I understand the fundamentals of how a transistor works but I don't understand why they are needed here; my only experience with them is when there's two power sources for signal and for operation. And to that regard, I'm a little lost where the leads should go in the circuit since there's only one power source to the breadboard, the arduino.

If you can help me understand this a little better I would be very grateful.
Mike