Solder on the ATmega Microcontroller, the input header (FTDI Serial) and the output header (ICSP). Choose the headers (male/female) that fit your needs.
Connect the solder bridge labeled 'PROG' on the back of the PCB.
Then burn the ArduinoISP sketch included in the Arduino IDE onto the chip using another programmer attached to the ICSP header.
After programming, disconnect the 'PROG' solder bridge again.
If you will be programming 5V chips from a 5V FTDI cable:
Add the VCC-EN jumper and enable it to pass 5V from the FTDI cable to the programmer and the ICSP header (for the chip to be programmed).
Bridge the 270 ohm solder pads together with a blob of solderand leave the 470 ohm pads empty. The resistors are only necessary when programming 3.3V chips.
If you will be programming 3.3V chips from a 5V FTDI cable:
Do NOT add the VCC-EN jumper. Both the programmer itself and the chip to be programmed must be supplied with 3.3V from elsewhere. The programmer will draw its power through the ICSP's VCC pin.
Add the 270 and 470 ohm resistors to lower the 5V from the FTDI's TX line (going into the ISP's RX line) down to 3.3V. The FTDI is fine with 3.3V on its RX line, so the ISP's TX line does not need level shifting.
Use the programmer as any other ISP.
In Arduino, select 'Arduino as ISP' before burning.
If you want to update the firmware on the ISP itself, you can do so via the ICSP header (obviously) or by temporarily enabling the RST-EN jumper and programming it via the FTDI like a regular Arduino.
Make sure to remove the RST-EN jumper afterwards, as it will block normal operation.