Here are the steps to go through when putting your wraps on:
Sit on a chair or bench. Begin with the wrap completely stretched and rolled up (this makes the process much easier than fighting to stretch the wrap as you go).
With your leg straight, start applying the wrap below the knees, working upward. Wrapping from "in" to "out," (counterclockwise for the left leg, clockwise for the right -- this helps avoid improper patellar tracking), anchor the wrap by applying 2 layers below the knees, then move upward, overlapping each previous layer by one-half the width of the wrap.
Apply the wrap tightly as you move past the knee, stopping somewhere on the lower third of the thigh (powerlifting rules allow 10 centimeters above the patella).
Most of the wrap is wound around the leg just above the knee joint in orderto "pin" the quadriceps tendon to the femur below -- better leverage). Tuck the end of the wrap under the previous layer to secure it. Repeat for the other leg.
An alternative more suitable for fitness and bodybuilding, perhaps, is to wrap tightly around the upper shin (where the patellar ligament attaches), then more loosely wound over the kneecap itself (this is important to avoid grinding the patella into the femoral condyle, creating a case of chondromalacia for yourself), then tightly wound over the lower quarter of the thigh.
The rationale for wrapping the knees prior to heavy squatting is that it reduced the pulling forces on the lower quadriceps and the quadriceps tendon at it's attachment to the patella. This translates to significantly reduced chances of avulsing (detaching) your quadriceps tendon or tearing your quads during heavy squatting. The chances of your patellar tendon avulsing from your tibia are a bit less, but nonetheless omnipresent.