Switching 120v with mechanical relay

I am looking into switching on and off regular 120v household power with a relay and arduino. (basically make one of these: http://powerswitchtail.com/default.aspx)

The reason I want to use mechanical relays is because It turns out that solid state relays do not shut completely off.

I have been looking around for a bit and I found this circuit

From reading the circuit diagram I gather that an external power supply is needed. Is the true because the Arduino cannot supply enough current? Also, is there anything else I want to take into consideration?

Thanks

So relay power and relay ground should be a separate power source equal to the relay's requirements and the arduino will just activate that via the transistor?

Ok thanks. Im assuming the diode is a safety measure to prevent backflow?

And the purpose of the resistor is to...

... and take out the arduino pin it is connected to in the process.