Well, there are different ways to do this but here is the steps I follow:

1). You want the surface of the model nice and glossy, so you use the Future or whatever you're using for a gloss first. Let this dry at least 24 hours- more doesn't hurt.

2). Brush a little of the blue label on the area where you want the decal (can't remember if it's the Sol or Set)

3). Cut the decal you're using out and wet the back side of it, let is sit for 45-60 seconds or so. Carefully slide it off into the liquid on the model. The liquid will allow you to move the decal a little before it sets up.

4). Blot away any excess using a tissue. Generally I just touch the side of the tissue to the liquid and wick it off.

5). Let it dry a little while- 2-5 mins or so.

6). Carefully add a little of the red label over the decal. This will cause the decal to wrinkle, do not touch it- it will straighten out as it dries.

7). After applying all the decals wait at least 24 hours and carefully wash the model using a little dishwashing detergent to remove any excess solution.  

8). Apply either a second coat of gloss or the final matte coat to seal the decals and protect them.  

My methods are much the same as Gameras. Only some slight differences:

I take my decals after cutting them out, hold them with my tweezers, and dip them in water. Afterwards, I place them on a folded paper towel to absorb excess water. I apply the blue (Set) in a small puddle on the kit. It is mostly a wetting agent that will also slightly soften the decal.

It's after it's in place do I apply the red (Sol). It softens the decal and allows it to fully conform to the surface. It will also draw it down into panel lines and conform to other details. It can be repeated to get stubborn decals to settle into place on complicated surfaces. It's much more aggressive than the blue.

Some warnings:

Not all decals are created equal! Different brands react differently to the solutions. Some go down so well, it takes little effort to get them to conform. Others are thick and seem to be unaffected by the solvent (Microsol) no matter how much you apply and how much you curse and implore the Gods of Decals for mercy!

Don't overdo the red! Puddling it on the decal can over-soften it and damage it. Too much can even mar your finish.

Resist the urge to touch the decal once the red has been applied. It can be so soft, it will stick to your finger! (Don't ask how I know this!)

The main key, as Gamera said, is a smooth, glossy finish! I even go so far as to polish the surface using an old tee shirt and good old Colgate toothpaste!

I always keep the two solutions straight by thinking of the blue as being cool (Microset) and the red as being hot! (Microsol) Ouch! Burn! Sizzle! Microset for setting and Microsol for solvent.

Jim

Thanks Jim, guess I only hit the high points. Yes, the red/Sol will 'craze' certain decals, causing them to wrinkle and never relax, Hasegawa ones are really bad for this.

Neither sol nor set will eliminate silvering.  That requires glossing up the paint in the area where the decal will be applied.  Setting solution is a gentle solution, and I generally DO use that.  However, solvents are a drastic measure and should only be used if the decal is a problem, not nestling down completely over the surface. Its use can be frought with problems, as a previous poster said. I keep it on the bench for those drastic cases, but it is not a thing I use regularly.

I will echo what Don said.

In a large number of models, you won't ever need to use Sol at all.

If you let your decals dry for a longer time after using Set (to "set" them in place), you can hold the model up to a light at various angles and you will see which decals need some Sol ("solvent" to melt them) to get them to snuggle down onto your gloss surface. If they are going to silver, they will already show that before you put a gloss coat over them. When you do it this way, you might only have a few decals that get Sol on them, or none, or a lot of them, but, you can be sure that you won't melt any decal that you don't put Sol on, only the ones you do are at risk for "blowing up", an old term for the way decals come apart when "over Sol-ed"

If anyone wants it, I can type up the complete "Microscale system" from one of their envelopes, you get a copy each time you buy a decal produced by Microscale and sold in the paper envelope. (I have one from the Krasel Industries days before the name Microscale appeared on their products, lol)

Rex

decal as usual (decal in water)

Future or any gloss coat on model (AB or HB depends on size of area)

blue bottle brushed on model

decal

dry

red bottle brushed gently on decal-not always necessary,it is for getting decals to snug down over or into details

dry

gloss coat to protect decal

flat coat if needed