Yes, you would handle footnote with href links. you may also want to include back links at the footnote for returning to the text. Footnotes in word are handled automatically if word files are saved in html.
Footnotes can be at the end of the document or another place some people use is at the end of each chapter with a href to jump over them when you get there. Some people even forgo the traditional footnotes and including them between the paragraph where they are referenced and the next one. This is particularly useful for explanatory footnotes. You can also use a mix of the above, depending on the kind of footnote.
Hopefully some future version will allow footnotes to be pop up windows but currently this is not the case. The ePub spec for version 3.0 may define it this way.
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