Michael,
Basically all you do is to lift the individual letters from the backing sheet with the point of a craft knife and press them down in position. The adhesive is waterproof after a day or so but you can varnish over them if you want.
As far as lining them up is concerned, I use a short length of masking tape applied to the hull as a baseline to butt the letters up against. Then I just lay them very gently into position so that the adhesive doesn’t “grab” and you can wiggle them around a bit by eye to get the right spacing. It’s quite easy really.
Colin