I figured out that red goes red and black to black and white to white. What I am not sure about is what to do with this green wire that is attached somewhere inside the dryer to the outside. Now I know I need to disconnect from outside of dryer for the new green wire to be hooked up. What I don't understand is how to unhook from inside of dryer or do I just leave it hanging in there or do I need to connect it to something else

On a 3 wire hook up the Neutral / White / center terminal is also the machine earth ground. There should be a ground strap from this terminal to the machine's frame.

On a 4 wire hook up Neutral and earth ground are separate.

You have to remove the ground strap from the center terminal to the machine frame.
Your green power cord wire then gets attached to where the ground strap was attached on the machine's frame.

Below is a link that may also help, if I did a poor job explaining this.
http://www.applianceaid.com/general.html#3to4