That valve turns and acts the same way as a water spigot. Full counter-clockwise opens it and lets the fuel run down to your carb. Full clockwise should close it off.
A leak in between usually is around the packing around the stem of that valve, just as you describe. Normally, you'll want the valve full open for running and, as others suggest, fully closed when shut down. No real point in running with it in between. In fact, if you do run it only partially open, it's possible to not get enough flow to your carb when you put a heavy load on, so fully open or fully closed is the way to go. If it doesn't leak at either of those points, you don't really NEED to fix anything.
Does that valve turn really easily? If it does and you wanted to try stop the leak, you might take a wrench to the brass nut nearest the end of the handle and tighten it down JUST A LITTLE. It doesn't take much to just compact the packing that's underneath the nut, which is there to prevent just the kind of leak you have. Tighten too much, and you'll actually make the valve too stiff to turn by hand. Put too much muscle on it and you could strip your threads or bust the whole assembly.
You should feel some resistance turning the valve, but only just enough to keep it from leaking while you're turning it open and closed. If that doesn't fix it, it may be that the packing needs replacing but, if the valve seals at the full-open and full-closed positions, and you don't mind a little drip while you're opening and closing it, I wouldn't bother with it unless you feel the need for a project.
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Today's Featured Article - What Oil Should I Use? - by Francis Robinson. I keep seein this question pop up over and over again in discussion groups all over the web. As with many things there are often several right answers and a few wrong ones. Some purist I'm sure will disagree to no end with what I will tell you but most of us out here in the real world don't really care do we ? Some of them only bring their noses down out of the air long enough to look down them anyway. If you are like me you are only doing this old tractor stuff because you enjoy it. You
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