I think I understand what an edge stitch is now, but I don't understand how it's used in this application. Here is what the step says.
Take the 4 1/2" by 8 1/2" piece of fabric and fuse the remaining 1 3/4" by 8 1/2" piece of interfacing and fuse it 1" in from one edge of the fabric. Fold the fabric over both edges of the interfacing and press into place completely inclosing the interfacing. Edge stitch one of the folded edges.