Problems with environment variables

[Mark Phillips <mark phillipsmarketing biz>]

I am using gdm and it is not reading /etc/profile when I log in.

I have googled for a solution, and the best I got was "dotting in 
/etc/profile" in ~/.xsession. I tried the following with no success:

1. Created a ~/.xsession file
2. Added the lines
. /etc/profile
3. reboot

What am I missing? What does "dotting in /etc/profile" in ~/.xsession 
mean? What is the preferred place to put environment variables on a 
system that uses gdm to login?

Thanks!

Mark Phillips