The engine thermostat is under the top radiator hose, between it and the water pump. Should be a thermostat housing, its in there.
The thermo stays closed until the engine hits 185 or 195 or 210 depending on the rating of the thermostat you decide to go with. Mine is a 185. Therefore, when my I6 hits 185 degrees the thermostat opens and it circulates coolent through the radiator and heating system. If the engine stays below 185, it will not get hot enough to open the thermostat and circulate.
This video should help show what it invlolves: