Black wire goes to ground, red wire goes to ignition (on when the ignition is on, IGN in the fusebox).
The way the choke works is that there is a spring inside the little black phenolic can. It holds the choke closed, i.e. in the cold start position. The black and red wire are connected to the ends of this spring. When you turn the key on and start the ignition, current flows through the spring and gradually warms it up. As that happens, the spring expands and opens the choke plate and rotates the high-idle cam out from under the high-idle adjustment screw. In warm weather, this happens pretty quickly; in cold weather it can take a while. So this spring mimics the time it takes the engine to warm up.
The adjustment on the electric choke adjusts how long the choke will be on. If you find it is turning off too soon -- you pass through a period as you drive in which the engine throttle response sags because the choke should still be on and it has turned off already -- you rotate the can one way, if you find it is staying on too long -- the engine goes through a period in which the engine acts like it is running too rich -- you rotate the can the other way.
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