You can either pierce the shawl or wear it threaded through like a backpack strap, although most of the time you see them displayed pierced through the knit of the shawl. Most of my shawls are sturdy and holey enough that I wear it pierced through, like this:The super-fancy shawls I wear threaded through the loop like a backpack strap. They tend to be one size fits all, unless you're using something that is super thick (like polarfleece) or super thin (like gauze).
You can wear it wherever you need to in order to keep the shawl or scarf on. Most of my shawls are sized so that I end up wearing the pin in the front somewhere near chest level, but plenty of shawls and scarves are long enough to do the "fling one end over your shoulder and pin it up closer to your shoulder" look. Some people use smaller ones as an accent on regular scarves or cowls. Check out the results you get for "shawl pin" on flickr and you should get some ideas.