How you get to these dimensions depends on the application you're using to do your design. Professional apps such as Illustrator allow you to preset your bleed space separate from your document size. This makes it very easy and convenient to add bleeds to any document. Simply select "Use Document Bleeds" when saving to a PDF and they will be included in your newly created file.
If you're not using an app that allows for this, you'll need to set your document size to include the extra 1/8" on all four sides. We then recommend you use guides that will show you where the edge of the page is after cutting so you can place your content appropriately.
Guides will help you see where everything happens so you can place your content accordingly.
In a nut shell, everything that bleeds goes past the edge of the page by 1/8" and everything that doesn't, such as typographical content, stays 1/8" inside the edge of the page.