Its a decal, you need to wet the back of the paper to release and activate the glue of the actual decal to the flag or sail. You don't submerge it, just wet the back enough to bleed through the paper to the decal and the decal should slide off the paper. Make sure you slide it off onto the flag or sail directly without it folding or anything. As smooth as possible. I believe their just using a q-tip in the picture to apply it because it should not stick to the front of the decal and will help dry the front aswell. you use it to smooth out the decal flat on the plastic. Do your best to have everything ready and lined up, you really should do it in one go, trying to re apply it if you put it on wrong can be a nightmare sometimes.
Have you ever used a temporary tattoo for example? Decals are very similar to them.