Here's that same picture but I cleaned off all the clutter for a friend with the same question last year.
http://jetboat.homestead.com/files/jetovator.jpg
The collar and spring go on the inside of the transom. This may help explain it a little...............The spring is used to counteract the weight of the jetovator and nozzle. It's purpose in life is to make it as easy to raise as it is to lower.
That same collar also acts as the anchoring point for the jetovator cable.
Then there's a plastic bushing that snaps into the transom housing and the tube slides through that. Mine had a rubber o-ring on it but it never really did much to keep the water out. You can buy a rubber bellows for em too, if the leakage is too bad.