guttboy
typically you would arrange charcoal around the element, once the coals are red hot and ashed over and the temp inside the smoker is around 220-300 F then you start smokin
you put your soaked wood chips on the coals and add more charcaol and chips as needed.
and yes you do want some water in the smoker, you need a certain amount of humidity when your smoking or it changes the texture and taste of the meat, so ya put some water in the pan.
there are a lot of online resources for smoking, do some searches for slow cooking, smoking and barbequeing.
another thing is get 2 themometres,one to check the the temp of the meat and one to check the temp of the smoker( unless yours has one already)
and make sure you have a lot of free time when you want to smoke
