This is one of those things that you just have to DO to see how it works. Basically, you're putting on three extra stitches to the end of your left needle, right?
You knit the first two of these and then knit the last one together with one stitch from your bag.
Then you put the three stitches from your right hand needle back onto the left needle and knit the first two, and then knit the last one together with a bag stitch.
Keep putting them back on the left hand needle and doing the same thing in this case, until you have taken 5 bag stitches.