Put a little bead on the middle of the CPU, about the size of a grain of rice (according to AS5's instructions). The Heatsink you put on should spread out the paste to cover the CPU.
You only need to clean it if it has been used before. In which case you can use either 91% isopropyl alcohol, or you can use Arcti Clean. I find that Arcti Clean works the best. It's cheap and you can get it off newegg.
For applying the paste, literally put a drop about the size of a grain of rice on it. Then push the heatsink down on top of it, which should spread the paste out. Then lock the heatsink into place and you are good to go.
use something soft to wipe it off tho...paper towels and such could scratch it....it's really nothing to be too worried about...but smoother the surface, the better contact it will make with the heatsink. i usually use those flat cotton thingies that women use to remove makeup....