alot of people do it different really. kinda what you feel works best, most put them in a place where the flow is high such as under the filter outlet or under a powerhead.
some people however place them under the filter inlet where it sucks the bubbles into the filter where it diffuses it more. or not as the case with alot of people. many people find that the co2 builds up in the filter and gets let out in one big bubble.
the most common place with lily pipes is to place it on the other side of the aquarium from the outlet. here the water hits the glass pushing it downwards toward the substrate taking the co2 with it. some may go into the inlet but in small amounts the filter should push it back out before it builds up.