what peewee offered is great advice -- chopping up the 'blob' into smaller pieces so Melodyne can detect the pitch (or percentage of pitch) better.
the wavy line indicates pitch modulation. if you have a really worbly (sp?? word??) singer, or a particular passage has a bit too much vibrato, you can use the Pitch Modulation tool to 'flatten' it a bit. (i'd caution you to use it sparingly...just try taking all the vibrato out of a pitch so that line is flat, and you'll see what i mean!!)
putting it into practice, if you have one really large 'blob' that you know contains more than one pitch, try chopping at the peaks of the modulation line (where those other pitches are) and Melodyne should recognize that there should be separate notes and will adjust accordingly. the more you do it, the better you get at finding where the right spots are to chop. hopefully that made sense...
the other thing you'll really want to master with Melodyne is the Pitch Drift (the 'slope' transition between notes) -- you want to find the right drift at either end of each note, otherwise you might end up with a slow dip up/down or Cher effect. the Formant stuff can be helpful also, especially with singers who have a tendency to get nasaly with certain vowels, or giving BGVs a different tone.
it's a slick program, but it won't work magic -- it can really suck the life out of a performance if you aren't careful, and you need a decent vocalist in the first place. in moderation, with a good/great singer, it can be extremely useful.
(or you could just pay me to do it, like pscyho_monkey suggested...
)