I don't know if I'm supposed to put it in a directory and if so, is this a directory that I've created
This should be the name of the folder you uploaded the extracted installation files to.
It has a line for administrator email. Do I change what's there to an email I use? Right now it's showing admin@mydomain. I've never used that.
You can change the admin@... to whatever emailadress you want.
Under the advanced tab, it shows a database name. Do I use what's there and if so, do I have to have to give it a password? There's no line for password so would I have to create one some place else?
I have never used Zen photo, but I can assume the database has to be created manually. Have you done that?