Where to put the tip: There are three zones distinguished by sound. In the first zone nearest the surface, the tip makes a bubbling noise and as it gets slightly deeper, a sucking or tearing noise. In the second intermediate zone, there is very little noise. In third zone near the bottom of the pitcher, the milk begins to roar loudly.
The tip should stay in the second, silent zone for the entire process. In order to create microfoam, position the tip at the top boundary, so you occasionally hear a sucking/tearing noise. Too much of the sucking/tearing noise and the foam will stiffen and not be micro enough. To just heat the milk after the foaming is done, position the tip near the lower boundary so you occasionally hear a roaring noise.
The milk in the pitcher should whirlpool or form a standing wave of turbulence in order to fold foam into liquid. With a one hole tip, angle the entry, and keep it close to the edge of the pitcher to rotate the milk into a whirlpool. With a multi-hole tip, point it straight down and keep it near the center of the pitcher—the hole dispersion pattern on a properly designed tip will create a whirlpool or a standing wave of turbulence for you. If your multi-hole tip does not do this, change it for another, or block some holes and convert it to slower, single hole use.
How long to foam: As the liquid turns to foam, the volume of the milk increases. This is called stretching. Keep foaming until the milk has gone up about 50% in volume. If you foam more than that, you will get a light microfoam for the classic cap-on-top cappuccino, but latte art will be impossible. Typically, the side of the pitcher will be lukewarm (40°C, 100°F) at this point. However, volume increase is a far more reliable indicator, and with some frothing setups, one even keeps the tip at the foaming point until the milk is fully heated.
How much longer to heat the milk: The milk should be heated to about 70°C (160°F), which is just below the point where protein curdles and the foam is destroyed. The easiest way to do this is to hold one hand on the side of the pitcher and stop when it gets uncomfortably hot. If the milk suddenly increases in volume, the proteins are curdling, and you've gotten it too hot. With experience and a slower frother, you can hold the pitcher by the side rather than the handle and have your other hand free (it also helps to have a higher pain threshold!).