When did first dates start to feel so pressured?

What do you do when you've had a first date and the guys is obviously more interested in you than you are with him?

Tonight I went out with my neighbor who I'll call John. So John lives in the apartment next to me and I met him while taking my housemates dog out to go potty/walk. He has a dog and we conversed about them maybe about 4 or 5 times. Hes nice and our conversations were never awkward. They were comfortable. Or..well I guess I never really paid them any mind, so to me they were just a friendly thing. I should have known that when he started asking me more questions about me and what I liked to do that he was interested. So last Monday, we were both outside with the dogs (randomly) and he asks me what my weekend schedule is like. I replied that I was thinking of going to Santa Cruz to hang out with some girl friends of mine and thats when he asked. He asked me to see a movie with him and my mind kind of blanked. I hadn't really thought about him as being something beyond friends...heck I didn't even know his last name or age or really anything about him besides the fact that he had a dog. So, me being me said yes because he seemed like a genuinely nice guy and I thought 'why not?'. Well, I just got back from that date and I've been pondering some questions.

These are the things I'm questioning:

During the movie, he put his arm around me and kept it there for the entire movie. He did the whole yawn thing too! I had to give him credit, but I feel like how was I supposed to maneuver out of it without totally embarrassing him/ rejecting him? I know I can't have it both ways, but it was the first date?! I felt a bit pressured to be more interested in him than I was. It got a bit awkward when after the movie we grabbed a drink at this new pub and as our conversation started to dwindle a bit, he put his hand on mine. I was like 'Oh my god...ugh what do I do?! This is only our first date. I don't really known you and you want to start acting like we're a couple?!' So, I got my hand out somehow and then he put his arm around me and I really couldn't reject him there at the pub with so many people around! I known that by my not rejecting his arm, I may be leading him on, but I did try to sneak in a story about a friend of mine who thinks that first dates are immediately relationships. I told him that I thought first dates were a kind of getting to know you and not a lets be together forever event.

Is it bad that at the bar I was glancing at other guys and thinking that I would like to be talking to them? John is a nice cute guy, but some of those guys at the bar were just lust-worthy and I'm pretty sure that I do not want a relationship at the moment. Especially since I will be moving back to So-Cal.

So, what I'm thinking is that I need to tell John that I am not looking for a relationship, but I'm not sure if I should keep hanging out with him and potentially lead him on or just cut it off and be like lets be friends....Or am I completely sabotaging myself by not letting myself feel something more for a guy I have a lot in common with...Am I supposed to try to be something more with someone that who I get along with or do I cut my losses after a less than "exciting" first date? I think he is a cool guy and deserves a second look, but how do you go about telling a guy that this second date is just a second take to see if you are interested?...