Thermal Interface Material (TIM) fills tiny spaces between the CPU and its cooler to assure optimal heat transfer. Most factory-supply coolers come with a stiff TIM pre-applied that becomes soft when heated by the CPU, but other coolers will require the use of thermal transfer grease or paste.
There are several ways to spread thermal paste, but dabbing small dots onto the contact area is probably the least wasteful. Though many well-read enthusiasts would panic at the "mess" seen in the left photo below, applying and removing the CPU cooler proves adequate spreading. A small additional amount will squeeze out from the edges over time.
Other methods, such as spreading the paste with a smooth piece of plastic, are often recommended by paste manufacturers, resulting in more paste being stuck to the spreading apparatus than the CPU. The concept is to provide a thin, even layer of paste on the CPU without creating an over-thick heat barrier, but modern pastes are usually thin enough to prevent this problem.
Excess paste will squirt out around the edges of the CPU, so it's important not to apply so much as to create a mess.