When you slip a stitch, it is just moving the stitch from the left needle to the right. When they say purlwise, you put your needle in from right to left as if you were going to purl and move it over to the right needle. In this case, the yarn will be hanging down the back as if you were knitting.
Then you move the yarn between the needles to the frontas if you are going to purl.
Then knit the next two stitches together. Put you needle in the second stitch from the point first, and then through the first stitch and knit them both off together. You'll be left with your slipped stitch and the yo on the needle.
The yo will leave an eyelet on the next row, but doesn't look like much now. Maybe this is where you're thinking something's wrong.
This may be way too much information, but I'm not sure what you're not getting.
Follow the pattern exactly for a few rows and you'll see the pattern develop.