Well, that depends on your site setup and most likely your chosen template.

If your template allows you to add custom CSS, you can simply write your own rules there. If not, you'll have to load a file in the template.

Or, even better, just copy the file /components/com_k2/css/k2.css into the folder /templates/YOUR_JOOMLA_TEMPLATE/html/css/ (create the "css" folder if it doesn't exist already) and edit that file directly. This way, your customized K2 CSS rules will never be overwritten when updating K2 in the future.

Correct.

It's all here for future reference: getk2.org/documentation/tutorials/templating-with-k2-and-the-concepts-of-sub-templates