There are a number of ways that digitizer/designers (those who create the computer files that your machine will "read" to stitch your design) approach an applique design, but most will be like this one, or fairly close with some minor differences.
The digitizer/designer will program the file you run to tell your machine to stop at various points during the stitching process so that you can do a number of necessary things: change thread to a different color, place your applique fabric in position, trim your applique fabric, etc. This "stop" might be referred to with different terminology: Color change, color stop, change stop, etc. It just means that your machine will stop so you can do what needs doing. I will use "color change" in this post. The design will (should) come with documentation that explains color changes, etc..
Step 1: Most simple applique designs will start with a "placement line" or "placement stitching". This will usually be a straight-stitch outline of the portion of the design that will be appliqued first.
Once the placement line is stitched onto your project fabric, you will place the applique fabric over the placement stitching, making sure that all of the stitching is covered. A variation you might find at this point is that the digitizer will have you print a template of the design to use as a pattern to cut the applique shape prior to placing it on your project fabric. You can use temporary spray adhesive on the back of the applique fabric to hold it in place. Paper-backed, fusible web can be applied to the back of the appliqué fabric before placing it on the project fabric. Fusing the applique fabric to the project will help stabilize the fabric and assure durability.
Step 2: Once the applique fabric is in place, stitch the second color change. This will "tack down" the applique fabric onto the project fabric. It is the exact shape of the placement stitching and is usually a straight stitch. A variation you might come across is that the digitizer has used a narrow zigzag stitch as the "tack down" stitching.
Step 3: Once the applique fabric has been tacked down, carefully remove the hoop from your machine, but do not remove the project from the hoop. Using sharp embroidery scissors, trim the applique fabric around the tack down stitching. Trim close to the stitches but not so close as to cut the stitches themselves.
Step 4: Return the hoop to the machine. Do this carefully so that the embroidery arm of the machine doesn't move or subsequent stitching lines will not line up properly. Stitch the next color change. This will stitch the "finish" stitching of the applique. In this example, it is a satin stitch. Variations you might find for finish stitching are blanket stitching or other decorative stitching. "Raw edged" applique is popular right now, so the digitizer might have you leave the applique with only the tack down stitching. This stitching might be made "bolder" with a double run of the tack down stitching or a triple stitch.
This example is a basic, single-fabric applique. Designs may include other applique pieces or added embroidery. Check the documentation that comes with your design for correct stitching order. And always, feel free to be in touch with any embroidery questions you might have. I've "been there, done that" for any embroidery situation you can throw at me!
Happy stitching!
Jo :)