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They want you to stick that around the edges of the opening on the bottom (plastic) part and put some sort of grease on there to ensure a good seal. Put the filter on top of this (aligned with foam seal), and replace lid.
I got an instruction sheet with my filter outlining the process. It makes it a bit tougher to put everything back together, but I guess it works.
Take the entire airbox out fo the car. Makes things alot easier. Hope this helps. :seeya