The book should have info about how to do that. You will hoop the stabilizer ONLY. Find the center point of the hoop and place a small mark. Find the center point of your fabric and place a small mark. Line up both marks. You can use spray adhesive or baste your smaller square onto the stabilizer.
Until you are familiar with machine embroidery I would not attempt this method for a while. At best this is a bit difficult because you have to keep a really close eye on the project while it's stitching. Sometime corners or edges can flip up and get stitched in the design.