Yes, you do need to deploy your application first.

See https://***.com/a/18333050/116472 for a step-by-step guide.

GWT 2.7 will introduce a way to launch your webapp in an embedded Jetty server (the same as in DevMode) while using SuperDevMode, and without even requiring the bookmarklets. See http://www.sencha.com/blog/getting-started-with-gwt-super-dev-mode/ (note that this is already available in the 2.7.0-SNAPSHOT that are deployed nightly)