you would cut the intake pipe in half further up toward the intake, the bypass has a sleve on each side that will slide over both pipes and a foam filter inside...
that way if your air filter gets submerged in water, the engine wont suck up the water, instead it will suck that air through the bypass filter....

ive got one sitting in my shed sumwhere that i never used, but i usually dont drive through alot of water

 

This page tells you all about hydro-lock and the bypass they sale

http://www.aempower.com/ViewCategory.aspx?CategoryID=20

 

my intake is just a 1 piece aluminum that i bought on ebay for $25, im trying to sell it for $500 now even tho im $2400 into it, today i did a compression test and it only 125 in cylinder #1, so i think i either have a bent valve or bad rings, but when i run it with out a spark plug in #1 nothing comes out so i dont think its rings