I have purchased a domain through 101 domains.
I would like to build and manage the site fro that domain through my godaddy hosting.
Do I have to transfer the domain to godaddy or is there a way to link it?
You can still keep your domain with 1 and 1 and use hosting at GoDaddy. Once you setup your hosting account, you should get whats called nameservers. You would use the 2 nameserver records provided by godaddy and enter those in on 1 and 1 in order to use hosting at Godaddy while keeping your domain at 1 and 1.