Alvin, the shim goes under the back of the axle.
Simply put, this is done to move the angle of the tires as hit the road outward to ease the steering effort. This is the caster adjustment. Think of a bicycle or even a motorcycle. In both cases the forks are slanted outward at the bottom to ease the steering. It's a little more important on a two wheel front end so that the caster of both wheels are adjusted the same. It has an effect on the ease of the steering and on the tire wear.
