The process of installing a cab file to a WM6 device is straight forward.
Either using Active Sync (for XP users) or the new Windows Mobile Device Center(for Vista users), copy the cab file to your device. You can pick where you want to place it. I generally place it in MyDocuments or sometimes on my memory card.
After copying the file over to your device, open the folder, highlight the file and either tap it with your stylus (Pocket PC Device) or hit the OK key (Smartphone) and it will begin the installation process. Follow the instructions that may appear (individual programs vary in what they may have you do).
Note: Some cab files are automatically deleted after installation and some are not. If it was NOT removed, you do not need to leave it on your device after it is installed. Depending on your memory needs, you may want to delete the cab file after installation if it was not removed. I generally do that and I keep a folder of all cab files in a directory on my PC in case I ever need to use them again.