Am I doing something wrong? ... =(

surasshu nailed it. All those pointers were totally correct.

As for what it means to "be confident" and HOW to do it... there's only one thing TO do. Fake it til you make it. Read on.

I DON'T mean for you to be like "Hey look at me, I'm a BAMF, suckahs, yeah... check me out." I DO mean for you to follow all (yes ALL) of surasshu's pointers... ESPECIALLY eye contact. My natural reaction usually when I make eye contact with a beautiful woman, is to look away. WTF is that? It's like a knee-jerk reaction, it just automatically happens - our eyes meet, I look away. I start talking to drop-dead gorgeous women, I get nervous. So how do you fix this? Practice practice practice.

Do you have any idea how well it would "cure" your shyness if you spent a day in a shopping mall going up to 100 beautiful women (or at least above-average women) and saying "Hey, I'm trying to overcome my shyness when it comes to approaching and talking to women. What do you think?"
The first ten or twenty you'll be totally nervous. After that, by the time you hit #50, guaranteed, you will be so comfortable and confident that you'll be able to throw in some jokes, make her laugh, maybe even get some phone numbers or e-mail addresses (e-mail's a lot less threatening, go with this one first like surasshu said.)

And a note on the smelling-good... do some research locally and on the net. Find out what all your friends say smells good, find out what everyone else is saying smells good. My personal favorite right now is Dolce & Gabbana (expensive but worth it, TRUST me) sometimes I add a couple sprays of Anchor Blue's "Azul" (very inexpensive and very noticeable) or Axe Lab (same deal) on my jacket to give her a nice mixture - she'll notice one, then lean in and notice the underlying scent and won't be able to help but say "You smell REALLY good..." and leans in even closer. Works GREAT.

Jam it back in, in the dark.