It is usually inadvisable to choose neighbors or close family friends to serve as references. The sooner the better. Most likely, you will need at least three, and possibly up to five references. Even if you only end up needing three, it is great to have five to choose from for any particular position. Open means that you have access to the letters and can see what has been written.
Closed letters are confidential.
Once you decide to have a confidential letter, you may not see it or have access to it under any circumstances. Most students choose to keep their letters open so they can review them before the letters are sent out to employers or graduate schools.