Question about Model + VAE installation

When it says "This checkpoint includes a VAE, download and place it along side the checkpoint.", does that mean I should put the VAE in the same folder as the model ("models\stable-diffusion"), or can I put it in the ("models\VAE") folder?

Also when using the model, do I have to do anything special in order for it to use the VAE that it came with, (if not baked in), or does it do it automatically?

When using the model, if the VAE is not baked in, you need to specify the path to the VAE checkpoint file in the code. The code should then load the VAE and use it automatically as part of the model. So, you don't need to do anything special other than specifying the path to the VAE checkpoint file.