I hear all sorts of people say that they learned English or whatnot from watching movies in the language. I don't see how people do this, unless they already have somewhat of a handle on the language. I've tried this, and all I do is get frustrated and then go find subtitles. lol Is there something I'm missing?

I learned a foreign language (Spanish) while I was in The Peace Corps.

I have learned how to speak much of Spanish from memorizing songs in Spanish (photographic memory) and then asking people what the songs about haha .

I learned a bit of Japanese from watching their TV shows and listening to their music... but now, i'm taking up the language in school. But i do have a friend that watched anime without subtitles and she still understands it even if she doesn't have any background of Nihongo. She just watches it a lot.

You learn something, but the best way to learn is listening to the radio, reading newspapers or books and talking with native speakers.

That's not true. most of the English I speak, I learned it from the old LP records that used to have the songs lyrics. while you hear the song you listen to the pronunciation and look in the dictionary for the meaning.
In order to do that you most have at list an elemental knowledge of the language.

I think learning from movies is a great technique but you are right you need to have some basics first. Some things that can help you to learn a foreign language while watching a movie are:

Don't watch the movie all the way through - Replay particular scenes and break down the dialogue.

Use a dictionary - Work on figuring out words you don't understand.

Mimic - This won't help you understand the language but will help you develop a good accent and pronunciation. When replaying a scene be a copycat and try and say the line just like the actor over and over.

You can find some more great tips at my foreign language blog: http://www.letutor.com/blog