Sounds like you don't have experience installing a non-Market app yet. No worries...
Like mentioned above, you simply need to install the file on your phone. Here's a little more guidance though:
1) Enable your phone to accept app installation from "Unknown sources"
....a) from the home screen, select MENU
....d) check the box for UNKNOWN SOURCES
2) Install (from the Market) a file manager app (two popular file managers are "Astro" and "ES File Explorer")
3) Use the file manager app to navigate to the file you downloaded to your phone, then click on the file; you should be asked how you want to install the file (using the stock Android file manager or the Astro/ES File Explorer file manager) Choose whatever you want.
4) DONE! Enjoy Flash on your Droid!
5) Drink a beer... (why not... it's Friday!)