Here's a simple diagram I made showing how an analog car is wired versus how a digital car is wired:
NOTES:
The only two requirements that differentiates the wiring for digital from analog is the digital chip and the ferrite man.
The ferrite man can be installed anywhere between the chip and the motor. It doesn't have to be on the motor, although this the easiest and most common place to locate it.
For the LED on the chip to activate the lane changers, there must be a hole in the chassis through which the LED sends its signal and the LED must be positioned directly above (or in) this hole. The hole MUST be located along the centreline of the chassis and should be as far forward as possible/practical (ideally, just behind the guide flag).
If the chip has (or has been modified to have) a remote LED that is on separate wires, it can be installed anywhere in the car, as long as the LED is positioned as mentioned above.
We generally use a little hot glue to hold the chip and remote optical sensor (if your chip has one installed) in place in the chassis.
(See this link for setting a car up with both analog and digital wiring: viewtopic.php?f=7&t=1230)
Well illustrated G. I would like to add my 10c. Chips are very hardy when installed properly. However, they do not take kindly to overheating with large or faulty soldering irons. I have lost several to my heavy hand in the past but I think that I have mastered it now. That said, if anyone who is new to digital, wants some help with their first time chip installations I for one can help and I am sure most of the “OLD” hands will feel the same.
Very clearly explained Gordon.
I second O'Brie's sentiment that any of the 'older' heads would gladly assist with chip installation for those without the necessary experience.