In order:
1. It fills in the gaps between the HSF and the cpu, allowing better heat transfer.
2. Depends on the the product.
3. Flames. Seriously though, you can severely damage the proc if it doesn't shutdown automatically.
4. Instructions are different for each product. Basically, spread a small amount on the core/heatspreader.
5. Don't quite understand. The tube runs out when you use it all..