How do I use macrons? I understand what they do and how they do it, I just don't understand how you know when and where to place them.
Macrons are mainly pronunciation guides, telling which vowels are pronounced long. In some cases they can resolve ambiguities, when two words only differ by the length a vowel. Using them is not necessary, and I would personally consider it better style not to use macrons when writing in Latin, unless there is a special reason.
Macrons were not used in classical Latin. See this separate question for the arrival of the macron.
I should also point out that there also a sign to indicate short vowels: the breve. Sometimes the absence of a macron does not make it sufficiently clear that a vowel is short. For example, we had recently a question about pōpulus and pŏpulus.
Your main question seems to be how to know when vowels are short and when they are long. The answer is simply that you have to learn the lengths when you learn the vowels. For example, "man" is vĭr, not vīr. The singular genitive ending of the first declension is -ī, not -ĭ. Therefore "man's" is vĭrī. To get the lengths right, it is not enough to know that the word is vir and the ending is -i, and there are no simple rules that would allow you to efficiently guess where to put macrons in a given Latin word.
As you progress in studying Latin, you will develop some intuition to the lengths. But it does not come without work, and I can offer no shortcut. This has the unfortunate consequence that if you have already learned many Latin words and endings without paying attention to lengths and you now want to learn where to put macrons, you have to relearn all vowels to get the lengths right.
In short: How do you know where to place macrons? You learn it case by case.
This is a very useful tool: "A Latin Macronizer" at http://alatius.com/macronizer.
It automatically adds macrons to any Latin text, while highlighting ambiguous or unknown words, which you will have to check yourself. It mostly does a very good job, and saves a lot of time.
Its author Johan Winge writes: "The expected accuracy on an average classical text is estimated to be about 98% to 99%. Please review the resulting macrons with a critical eye!"
Note that it has a hard time distinguishing between nom.sg. -a and abl.sg. -ā, and between nom.sg. -us and gen.sg. or nom./acc.pl. -ūs.