Personally, I haven't tried ADF navigation in the sim, but I'm guessing its similar to VOR navigation.
This is a post by one of the members here at Flyaway (Bindolaf):
Well, you need to imagine that the VOR station is a sun, drawn by a child. The rays emanating from the center are the "radials". The one on the top of the sun is the 360, the bottom the 180, the left the 270 and the right the 090 radial. All the ones inbetween are 1 degree apart.
These rays mark "roads" in the sky. So, if you take the 090 radial OUTBOUND from the VOR, you will be travelling east, away from the VOR. If you take the 090 radial INBOUND to the VOR, you are travelling west, going towards the VOR station. Make an actual drawing of this on a piece of paper and ponder it for a bit. That is the meaning of inbound and outbound.
You will ask: "If I am inbound to the VOR on the 090 radial, am I not travelling on the 270 radial??".
No! Your heading will be 270, but the radial you're on, the "road" you're on is called 090. Once you pass the VOR station, the "road" is renamed 270 and now you're travelling on the 270 radial OUTBOUND instead of the 090 INBOUND to the VOR. Your direction hasn't changed.
So why bother? Because that's a good way to navigate. Let's say you want to go direct to a VOR called ABC and then you want to fly the 014 radial outbound.
You tune your NAV1 to ABC and fly direct to it. Easy, right? Going "direct" is very easy (just "point and fly") but it's not the usual way. Ok, so now you're approaching ABC and you want to fly the 014 radial outbound. Why? Why the 014 and not "approximately north"? Well, because it's a precision navigation procedure (if I may be allowed the term). Because on that exact radial you will find your next waypoint.
So you approach ABC. Your NAV1 is tuned to ABC's frequency. Now you turn your CRS (or OBS or whatever it is called) [but NOT the heading bug, not the HDG button] so that it shows "014". This has aligned the navigation equipment (not your plane) to show the right radial of the right VOR station. Now you will need to find and fly on that radial. From this point on, read the lesson again and try it or read one of the many excellent tutorials on this site. If you still have questions, I'll be happy to take another stab at an answer.