Mercurial ignore file

I'm trying to get Mercurial to ignore a configuration file, but I'm failing to get it working.

I have created a repository on my server with hg init and cloned that repository to my computer. I then want to be able to edit the configurationj file but not commit those changes back to the server.

I have tried creating a .hgignore in the root of my clone, but Mercurial flags the file with a ? and whether I commit it or not it still continues to log my configuration changes.

Am I creating the .hgignore file in the wrong place, does this file need to be commited? Does it need to be created before I init the repository on the server?