Help with Ann Norling sock pattern

[Carrie218]

Here I am trying to knit my very first sock and reached a point that has me stuck. In the instructions, it is the "Gusset" which reads as follows:

1. With loose needle, PU & K 16 sts along side of heal, using the sl sts on edge.
2. Combine the instep sts from the next 2 needles onto one needle. K across.
3. PU & K 16 sts down other side of heel. K to the middle of the sts on the last needle & slide the other half on the first needle. This is now the center of back of heel. There will be 25 sts on needles #1 & #3 $ 32 sts on needle #2.
4. Knitting in the round again, dec in the following manner:
Rnd 1: K
Rnd 2: At the end of needle #1, K2tog, K1. K across needle #2.
At beg of needle #3, K1, SSK



So here's my question -- if one has never knit a sock before, how does one know which is the side of the heel and which is the instep? Can someone point that out on my picture? The top needle is holding 32 sts and has just finished forming what I think is the heel.

The instructions say, "With loose needle, PU & K 16 sts along side of heal, using the sl sts on edge. " Which edge???

Any help on what my next step is would be most appreciated!