I play this constantly
Rearrange the letters in to the order you want to apply them on the board by dragging them in the lower pane. E.g. if there's a "A" on the board and you want to spell ZAURUS, arrange your letters in the order ZURUS. Then click and drag on the board to lay the letters out.
The dictionary is not extensive, there are a lot of words it does not know. If it complains click "Add" and it will add your word to the dictionary. Don't bother cheating though- the Zaurus remembers the words and will use them against you in later games!
The only way I have found to skip a go is to tap on a letter already on the board and click the tick icon (or was it the -> icon, I can't remember)
Good game, very satisfying to beat the Z, as the more you play it the more words it knows.
