Yes, you have to cut the ends which is part of the selvage...just like yardage except it's only 2.5". Each strip is cut across the width of fabric. For the pattern it is from Jelly Roll Quilts by Pam & Nicky Lintott.
When I'm using jelly rolls, I cut each strip in half. It's easier to starch a 20" strip than a 40" strip. If you ever make a French Braid I strongly recommend heavy starching because you will be working on the bias and gentle handling when you're sewing. Don't let the braid hang or pull (even with starch it can stretch a bit). Same for tube quilting.