So, I setup a View that provides a page and set its URL to taxonomy/term/$arg. I've attached a screenshot of the arguments and filters settings. Notice that I don't have to provide any sort of filter information for the term ID, because that gets handled by the argument.

The argument stuff isn't totally clear, but I believe it uses the $arg values from the URL and hands those off to the arguments you specify in order... the %1 there just indicates to get the title from the term specified by the $arg.