What is it hooked up too and how dose it work and why?

 

Wikipedia knows:

Capturing vented vapors

Within the vehicle, vapors from the fuel tank are channelled through canisters containing activated carbon instead of being vented to the atmosphere. These are known as carbon canisters. The vapors are adsorbed within the canister, which feeds into the inlet manifold of the engine. When the vehicle is running, the vapors desorb from the carbon, are drawn into the engine and burned.

 

If you look at the factory service manual (see FAQ) or your copy of the Hayes manual, there is a pretty good diagram of the vapor recovery system.

To make a long story short, the charcoal canister absorbs fuel vapours created when the fuel tank warms up or when you fill the tank. While the engine is running, air is then sucked through the canister and into the intake manifold to purge the vapours. It's also part of the PCV system.

 

Does anyone have a picture of where the connection is for the smaller hose off the canister?

 

Its in the FSM.