You'll want to put a little on both the heatsink and CPU core.
Here's what I do...I wrap my index finger with plastic food wrap. I then put a really small amount of Arctic Silver on the wrap and then rub it onto the heatsink in the area the CPU core will contact. I then rub the CPU core with whatever is left on the wrap. When I'm done, both surfaces have a really thin layer of Arctic Silver on them.

Cricket