How to properly tighten "internal" nut on the rear axis?

Question

This is basically a follow-up of my previous question.
I am talking about the nut between the frame and the cassette (see attached image). In other words not the "external nut" which fixes the axis to the frame.
This nut was loose, but I realized that tightening it too much locks the axis together with the hub/cassette: in other words when the cassette was rotating, it was also moving the axis along itself, which of course is not supposed to happen.
So what I ended up doing was tightening this nut by hand, just enough so that the hub can still move freely, without taking the axis with it. However, I'm not sure this is the right thing (maybe you are supposed to tighten it all the way, and something is wrong with my wheel and that's why doing so locked the hub and the axis together?)
So the question is: what is the proper way and amount to tighten this nut?
(Also, if it has some more proper name than "internal" nut, I can gladly edit the question.)

David D · Answer

Let's get our part names clear
From Sheldon Brown

The nut in the posted question pointed at with the red arrow is the locknut on the freewheel/cassette side.
The side of the axle with the large spacer - the left side in the picture above is the freewheel/cassette side.
First remove the freewheel/cassette.
Second
Tighten the locknut against the cone by:

using the correct size wrench on the locknut
the correct size cone wrench (a thin wrench designed to be used on the narrow surface of cone flats)
and tightening them against each other

Note: Steps one and two answer the question - how is the locknut tightened.
However, it's important to get the cone adjusted correctly so that the hub turns smoothly on the bearings with no play as part of the tightening process.
Then re-install the freewheel/cassette
Cone wrench set

How to properly tighten "internal" nut on the rear axis?

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