The air filter is placed on the hose from making vent your crankcase.

When the motor tu s the air is alte ately blown and sucked through the hose.
So you have any dust that may enter your engine and it is not good! especially it is not, most of the time, oil filter on these engines. Place the breather the highest possible level of the steering column is ideal.

This filter is usually used in time 'breather kit' that is, ventilation receiver ..
Do not expect to gain power by adding the ventilation system. It is originally a method of tuning Japanese after they are added where hose apparent on Monkey for fun.