does both pc has be on wireless internet to make ad-hoc wireless network?

Answer 1

Well no they don't have to be on the internet to have an AD-HOC network. They do both have to have wireless adapters. Ad-Hoc is peer to peer networking so you can indeed connect two computers together with or without internet.
The two computers do need to be close enough to each other for a direct connection (usually 100-200 feet or so).

This works very similar to a cross-over cable between the two machines (if you want a comparison to ethernet).

There is a great MS article on Ad-Hoc.
http://www.microsoft.com/windowsxp/using/networking/expert/bowman_02april08.mspx

And one from searchnetworking
http://searchnetworking.techtarget.com/tip/0,289483,sid7_gci1215961,00.html

And in case you are running VISTA
http://windowshelp.microsoft.com/Windows/en-US/help/293c504f-b944-4d5d-835c-f080129bd5dc1033.mspx

Hope that helps.