About Q 3, that would be the DOSbox installer, and since you already have installed DOSbox, you don't need to think about that.
Q 2: That is the zip archive that is, the package the game came as. You need to extract the files from thaat package to a folder of your choise. For that you'll need a "packing/unpacking" program such as WinZip. When/if you have this installed, right click on the game archive and select "unpack to..." or whatever it says. Point is you want to decide where to unpack it.
Q 1: You already have a folder named BaK? Did you create it yourself or did you already unpack the archive?
IMPORTANT: In DOS and DOSbox no file/folder name can be longer than 8 characters, so a folder named "Betrayal At Krondor" would have to be renamed, for instance "BaK".
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