Stitch Holders - how to use?

I am a little confused by a pattern. I am knitting in the round and the current round has me place 11 stitches on a stitch holder then continue to knit the rest of the round.

Am I supposed to just knit across the held stitches? It seems like this would either create a hole in the work or give a stretched look to the section.

PLEASE help!! This is supposed to be a gift.

Thanks :??

When they say to put the stitches on a holder, what is that section for?