1. An establishing shot essentially sets up the context for the narrative and show the world of the story, eg. the setting, the time of day, etc. An establishing shot sets up the picture or mental image for your story. An establishing shot introduces new scenes and tells the viewer where and when the action is happening.
Perhaps the definition of "establishing" may help you; to set up (an organization, system, or set of rules) on a firm or permanent basis.
2. To apply an establishing shot to your narrative, introduce the key details of the scene in an easy-to-read and understand format. Make sure your writing paints the picture of the scene and properly introduces the story. If you correctly do this, the narrative should flow properly and make sense.