In the installation instructions it says "Copy the content of the htdocs/ folder where it can be accessed by your server". What exactly does that mean?

Do I move the contents out of htdocs onto the main site directory, change the settings of the folder?

You have to copy the files and folders inside htdocs to your server and not the htdocs folder itself.
It has to be placed there in a directory (may be named www, htdocs, public_html, ... (see your hosters documentation (FTP, ...))) that can be 'seen' from the net = there exists an URL to access the files.

Ok, I did that. I made a folder, then copied the contents of htdocs to that folder.

I made mainfile.php and the uploads folders writable.

Now on step 3, it says, "3. For security considerations, you are STRONGLY encouraged to move directories "/xoops_lib" (for XOOPS libraries) and "/xoops_data" (for XOOPS data) out of Document Root, and change the folder names." Is this to be done now,afterward?? The installer is going to be asking for this file, so when I move them now, it will not find them and return an error. I tried replacing it with the new file location and the new name, but it returns an error because it is looking for the file.

Does this mean this files from the original htdocs? Kind of confusing.