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• Use WordPress’ builtin plugin installation system located in your WordPress admin panel, labeled as the "Add New" options in the "Plugins" menu to upload the zip file you downloaded
• Extract the zip file and upload the resulting "wp-prettyphoto" folder on your server under wp-content/plugins/.

All you need to do after that is navigate to your blog’s administration panel, go in the plugins section and enable WP-prettyPhoto.

In order to personalize the available options, check in WordPress' "Media" section under "Settings" (options-media.php).

For more information, see the "Installing Plugins" article on the WordPress Codex.