The pictures help a lot.
The pocket liner will be on the inside of the sweater.
You'll knit across the stitches on the needle, and then across the red holder. The pocket liner will hang down behind the part of the sweater front that you've knit already. When you sew the sides and bottoms to the inside of the sweater, that will be your pocket.
The stitches on the gold holder will be the ribbed edging.
When it's all done, you'll put your hand behind the ribbed edging down into the pocket that's attached by knitting across the red holder to the sweater at the top and is sewn on the inside.
If it's still hard to envision, flip the pocket liner so that it's behind the sweater that's on the needles and hold the red stitch holder behind the needle. Then maybe it will be clearer.