I sew it to the shoulder seam at the same time as I sew the seam and I apply it to the back of the seam. Do not stretch the elastic as you sew. The fact that clear elastic does not have a lot of stretch is the reason it provides stability to the shoulder seam.
When using it for a project, I've found that it's much easier to leave it on the package while sewing it to the shoulder seam because it's hard to work with a short piece of this stuff. I've learned this with practice!