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Reading values from I/O port

Hi,
I'm trying to read data off an I2C bus using a software simulator.
I see in the P1 peripheral dialog that P1.0 (SDATA) is low in the "Out" line, but the "In" line (latch?) has all of its high.
All I want to do is to read the bit in the "Out" line, but when I try to do so, I get the "In" line (although the debugger shows P1.0 as low).

My question is -
Can someone explain the difference between the two? I know one is the actual input pins and one is the output latch, but how do I manipulate the latch? How is it helpful? How do I read the actual value of the input pins?

I've read http://www.keil.com/support/docs/2071.htm and many more and still couldn't get a clear understanding of it...

Thanks!