Exact location of CI files

Hi Everyone,
I've been using CI for a few months and have a couple projects up and running. However, I'm not sure I performed the installation exactly as the manual says for optimum security....I'm now starting a third project and want to try to do it correctly.

The problem is I don't understand the manual's installation instructions in terms of where you are supposed to put the CI files. It says that index.php should be in your root. It also says that the application and system files should be ABOVE the root.

That should be clear, but I don't get it. I think I'm a little bit mentally challenged when it comes to file hierarchies...they are much much harder for me than coding stuff, so can someone please help?  

As of now my brand new site has simply the main folder,  www.mysite.com, and the folder inside it, called public. ...given that, where do I put the CI files?

This is a pic of my latest attempt: http://i.imgur.com/ZWDd8OU.jpg. Can someone please tell me if it is correct, or if not where to put the files?