Yes, you must put your preferences down in the exact order you do prefer them.
Each school will make it's offer based on whether you meet their published admissions criteria, and where you place them on the list makes no difference.
The LA collates all the offers you receive and passes on the one that is highest on your list of preferences.
So put your 'long shots' first - you never know, you might get a place - but if you have a 'dead cert' in last place that place will be offered to you - as long as you are within their admission criteria.
If none of the schools on your list can offer you a place, because you don't live close enough or don't meet the faith criteria, or whatever, then you will be offered a place elsewhere - one that has places once all the other offers have been made. Which could be much further away or not what you want. This is why it is important to list at least one local school that you will get a place in, because what is left may be worse!
Do list your favourite school even if it is a long shot because you will automatically be placed on the waiting lists for any schools higher up your list that you do not get an offer for in the first round of allocations.
Things that do not work: listing only one school, listing one school repeatedly in every preference place, only listing favourite but 'long shot' schools because they 'have to give you one of them'.
Another myth is that if you list a less popular school lower down your list you will get given that even if a favoured, more over-subscribed school can offer you a place 'because they want to fill places up'. The process is governed by law, and they don't / can't mess about like that.
These are all myths / theories I have heard circulating locally!