It took me a while to figure it out when I first started, too.
First,
don't cut the elastic before you sew it in-- just mark on your
dipes where you want it to start & stop.
I use a soft-stretch elastic, about 1/4" wide. Don't remember the brand name, don't have a package, but it says it can withstand being washed in hot and it is very soft and very stretchy. I buy it from Wal-Mart

I've never had a problem with it, it holds up mighty mighty well.
Now, you lay the elastic on your dipe, with it past the mark about 1/2 inch. If you have a "tack" stitch (it's the same thing as the bottom and top of a button hole), use that, then go over it back and forth with a short straight stitch to lock it in.
Then set your machine to a 3-step zig-zag stitch (aka stretch stitch). Now, pull your elastic taught- pull as tight as it will go then let up just a little, and sew over the elastic with the 3-step zig-zag, all the way down to the end mark.
Finish with the same tack stitch, and a short straight stitch over that. NOW, cut the extra elastic off, about 1/2 inch from the tack stitch. Ta-DA! It should have just the right amount of give.
The 3-step zig-zag was designed to sew the length of elastic-- practice on scrap fabric first! Dipes take too long to cut out and it is hard (though not impossible

) to pick out the zig-zag!
There is a cool video somewhere out there on the net that shows how, but I can't remember where!