Jay,
Close hauled is a point of sail. It is not possible to sail directly into the wind or within aproximately 40 degrees of of the wind in either direction. That 80 degree or so zone is the "no go zone" or "in irons" point of sail. If you are sailing into the wind as close as possible to the "no go zone" you are said to be "close hauled". Your keel or dagger board needs to be down when close hauled to keep your boat from being blown sideways. As you turn further away from the wind less keel is needed to keep your boat from side slipping. If you are running with the wind (going the same direction as the wind is blowing) you can pull your dagger board up to reduce drag because the wind is pushing your boat straight forward and not sideways.
Doug