I think they are suggesting that your hand should go on the pretty side (the finished top), and the metallic side of the insulbrite should face away from the top, so that it is on the side that will be touching the hot things. But you need at least one more layer of batting (I add at least 2 more layers) to keep the heat from getting through.
But if you're using it as a hot pad, you'll want the pretty side up, so that you can see it when the pot is not there.