It mounts in the rear tailsection. Power Commander has good directions for installation on their site. I gotta admit, I hate PC's site. It's really clunky and their install software doesn't get along well with Window's Vista. Go to PC's site, explore around, and you'll get most of your questions answered about installation.
The PC takes all the instructions from the bike's ecm, modifies the fuel map, then deliveres the modified information to the bike. It compliments your factory ecm to streamline performance, and to allow you to change fuel maps according to what engine mods or changes you make.
I'm sure there are more benefits i'm missing, that's just been my experience and observations with it.