First download the .ZIP file
Next unzip that file into "C:\Program Files\The Bat!\images" or whichever drive and folder you have TB installed in. The important piece is it must be in the images subfolder under the TB main folder.
Then in TB, go to Options .. Preferences .. Messages .. Message headers .. Add
Then set up the following information:
Finally, add the following macro to your template (Account, folder, or addressbook)
Just change ":your_handle:" to the handle you chose when setting up your account.
You're done. Restart TB, and you should be able to see everyone's face. Send yourself a test message (remember which template you used) to make sure your image shows up.