Wheels/bearings - how tight to do your nuts.

Ok so I have some new wheels and they are on.
If I tighten up the nuts so there's no slack (as in only just no "wobble" - I'm not talking jamming them on here) then I would think the wheel should run nicely round on the bearings alone and be all smooth and everything. This does not seem to be the case - as I tighten as soon as there's no movement in the wheel there's something stopping it rotating - doesn't seem to be on the outside of the wheel (the nut side) and there is a spacer washer on the inside.
A bit of slack means the wheel runs round on the inside of the bearing and the spacer, and is not rotating the bearing as such - or does it do a combination of both?
Do I really need to leave a bit of space for the wheels as I tighten the nuts?
If I tighten up the nuts so there's no slack (as in only just no "wobble" - I'm not talking jamming them on here) then I would think the wheel should run nicely round on the bearings alone and be all smooth and everything. This does not seem to be the case - as I tighten as soon as there's no movement in the wheel there's something stopping it rotating - doesn't seem to be on the outside of the wheel (the nut side) and there is a spacer washer on the inside.
A bit of slack means the wheel runs round on the inside of the bearing and the spacer, and is not rotating the bearing as such - or does it do a combination of both?
Do I really need to leave a bit of space for the wheels as I tighten the nuts?