Two questions, both answered here: what key am I actually in with the capo where it is, and where do I put the capo so I can play shapes I already know.
What a capo actually does
It shortens every string by the same amount, so every chord you finger comes out higher by that many semitones. Put it at the second fret, finger a G shape, and the room hears A. Your hands do not change. The pitch does.
Why singers use them
A song written in E flat is uncomfortable on guitar and there is no good open shape for it. Capo at the first fret and play D shapes instead: same sound, shapes you already know. The table above lists every position that gets you there.
If you would rather change the written chords than use a capo, use the chord transposer instead.