Hello there
Lapping is indeed sanding down the surface of either your CPU, or the base of the heatsink....or both. Use 220 grit wet/dry sandpaper. Automotive grade works great (it has a nylon back and does not tear as easily as the paper-back type). Affix the sandpaper to a very smooth surface. A glass table-top works best.
Thoroughly wet the top of the sandpaper that is on the table-top. Holding the heatsink firmly, place it on the sandpaper and make circular patterns on the sandpaper. After about 10 seconds, you will be able to see what was not "flat" about the heatsink base. Continue for about 10 minutes (or until satisfied), and you will even out any un-smooth parts.
Next up, the CPU:Q
Holding the CPU as firmly as you can (upside down!!), and making sure it does not get wet (or at least not on the delicate electrical parts), make curcular patterns with it also. With the CPU, you don't need to sand as much, and do not apply too much pressure. Let the sandpaper do the work!
Regarding the paste, a dab will do the best. 
With the CPU in the socket, plop a dab, about the size of a grain of white rice, on the CPU core. Now carefully place the HSF on top. Depending on the HSF hooks, you may need to latch one side, then gently place the HSF base to the CPU, then attach the other hook.
G/L,
Edblor