Summarize the following:
Take your plastic template and get it into the position you want on the piece of background fabric. If you want it to be perfectly centered in the middle of a section, use a ruler to get it exactly right. Use the template rather than the actual appliqué fabric since the fabric has a seam allowance, making it bigger than it'll actually be in the end. Pencil chalk or an erasable marker is the best choice to trace the template so that the marks will disappear later on. Do your best to hold the template completely still while you trace it. Use short, thin pins, which you can find at any crafting store. Place the pins slightly inside of where the seam allowance ends, so that you won't have to move them out of the way once you actually start to sew. Put a pin in every corner if your image has corners. Otherwise putting one pin in every 1 in (2.5 cm) or so should be enough to hold the fabric in place while you work.

Summary:
Position the template on the background fabric. Trace the template onto the background fabric with pencil chalk. Align the appliqué fabric overtop of the tracing and pin it in place.