How to setup up dual monitors

Yes, setup dual monitor via thunderbolt ports.

Depending on what iMac model you have, you need an adapter from the type of connector on your iMac video output (Mini DVI, Mini Display port, or Thunderbolt) to what ever connector you have on the external screen (DVI, VGA, HDMI, Thunderbolt) and the proper cable to link the two.

To setup the displays, open system preferences, Displays, and set it up the way you want it (extended display or mirrored)