Paper napkin is made of more sheets of thin paper, and just one of them is decorated with coloured figures. Of course let's get rid of the blank sheets and let's keep and cut just the one with the pictures.
When deciding the decoration and the composition, let's keep in mind that the sheet of paper of the napkin is very transparent and fragile, still it adjusts very easily even onto surfaces with more than one curving.
I don't mean the paper napkin is better than normal paper for decoupage: there are certain difficulties using this kind of paper too, and the fact that this paper is so thin and transparent might be a problem sometimes. The trick is just to know the peculiarities of this material, and value the best subjects, colours and surfaces that will enhance these features the best.
As we said before, the paper of the napkin is transparent, so when we choose the background colour we'd better prefer bright colours or even white. If you wish to make a strong coloured background, then you should set the paper figure and draw along its sides with a pencil, in order to paint the shadow white.
I would suggest painting the background just white, then glue the figure on, then paint around it with colours, because the sheet of paper is so thin and transparent that you would have ugly results if you tried to paste the figure on a coloured background: the colours of the napkin figure will be altered by the background colour. So I prefer to use this kind of paper on a white surface.
Get rid of the blank sheets of the napkin, and keep just the top, the one with the picture. Cut it as usual with manicure scissors, or rip the side of the figure if you wish a shading effect.
Now to paste the figure do not apply glue on its back, like you used to do with classic decoupage technique. Just put the dry figure onto the surface, then using a soft flat brush, spread the water varnish on it. Be careful not to make creases. Varnish passes through the thin sheet of paper and pastes it on the surface.
There exists a special glue made for this purpose, nevertheless you can use the same water varnish you already have for normal decoupaging and save your money.
I must advice you that when you paste small figures, you usually succeed in avoiding creases, while when you paste bigger figures it's almost impossible. Never mind, and do not insist too much with the brush trying to lay them, because the sheet of paper is really too fragile and you would damage the work. Once the varnish has perfectly dried, then you can smooth the surface using the finest abrasive paper, then you'll finally get rid of these ugly creases, but be very carefull when using the abrasive paper, or you would scratch the picture. Give a second coat of varnish, and again use the abrasive paper on the dried surface.
Then you can retouch the figure, and add some details, or exalt the ones already printed, or shade the border of the figure into the background.
In order to protect the work, you'll have to varnish it. I suggest water varnish for parquet, because it doesn't alter the colours. You won't need to give so many coats as you were used to with classical decoupage, because the difference in level produced by the scrap is smaller.