Installing stats

I have absolutely no idea what the directions mean for installing the stats.

(1) Upload stats.php to your /wp-content/plugins/ directory.
What is stats.php and how do I upload them to /wp-content….

(2)Activate the plugin through the ‘Plugins’ menu in WordPress.
Hopefully when (1) is done, (2) will appear like magic

(3)It will ask you to enter your WordPress.com API key, do so.
OK I know what the API key is so I’m set there

(4)Sit back and wait a few minutes for your stats to come rolling in.
I have the beer in the fridge waiting for Steps 1, 2 and 3 to be done.

Help!!!!