After you've placed the markers for your heel stitches:
Knit to 2 stitches before the end of your heel stitches.
Make 1 by doing a lifted increase:
With the right needle, pick up from the back the bar between your needles.
Slip your left needle in front of your right needle, into the stitch you lifted.
Knit the lifted stitch through the back loop.
Knit the next stitch.
Wrap & turn:
Slip the next stitch (the last heel stitch) to the right needle.
Bring the yarn to the front.
Slip the stitch back to the left needle.
Put the yarn to the back. That wraps the yarn around the stitch.
Turn the sock, because you're now going to purl back in the other direction. Do not pull your stitches tight. If you do, it will make your life miserable later.
Purl 3 stitches and place a different marker. This is your "turning" marker.
Purl to 2 stitches before the heel marker on the other side.
Make 1 by doing a lifted increase on the purl side:
With the left needle, pick up the bar from the back.
Slip your right needle into the front and purl the lifted stitch.
Purl the next stitch.
Wrap & turn:
Slip the next stitch (the last heel stitch on this side) to the right needle.
Bring the yarn to the back.
Slip the stitch back to the left needle.
Bring the yarn back to the front.
Turn to knit back the other way (remember, keep your tension a little loose).
Knit 3 stitches and place one more turning marker. Knit 5 more stitches or so, and stop to ponder.
However many heel stitches you started with, you now have 2 more, because you added stitches right before you wrapped and turned. Four stitches in from your heel markers you have other markers -- the "turning" markers. These are just to help you going forward, because they tell you where to stop, make a stitch, work a stitch, and then wrap and turn.
Continue knitting to your turning marker. Take it off temporarily (I hold it in my teeth). Do a lifted increase, knit 1, slip the next stitch, bring the yarn in front, slip the stitch back, bring the yarn in back. Turn to purl the other direction.
Purl 3, take the marker out of your teeth and put it back on the needle. Continue purling to the turning marker on the other side. Take it off, hold it in your teeth. Lifted increase, purl 1, slip/wrap/turn.
Keep doing this.
Knit 3, place turning marker, knit to next marker, M1, K1, wrap & turn.
Purl 3, place turning marker, purl to next marker, M1, P1, wrap & turn.
It's weird, because your rows will get shorter and shorter but because of your lifted increases, the number of stitches between your heel markers will grow. When you have the number of stitches designated for the heel flap, you're done with this step. You've just turned so the knit side is facing.
You'll knit all the way around the sock now. You don't need your turning markers anymore, but keep your heel markers in place.
When you encounter a wrapped stitch, pick up the wrap and place it on your left needle, then knit it together with the stitch which it had wrapped. There should be one of these wraps for every time you turned (see the chart). Stop in the middle of the heel to ponder for a moment.
Wrapped stitches aren't my favorite way of working short rows. They're hard to explain and they don't make any sense. There are other ways of closing the gap that happens when you turn and work back the other way, but all of them are fiddly and even harder to explain. Life is a little better if you relax and let your wraps be a little loose.
OK, despite your momentary joy at working in the round, we're not quite done working back and forth. Now we need to knit the heel flap. Continue knitting, up to but not including the last stitch before your heel marker on the left side. Get the marker out of your way and do a SSK.
Turn, slip the first stitch, and purl back to the last stitch before the heel marker on the other side. Purl that last stitch together with the next stitch on the other side of the marker, discarding the marker in the process.
Turn, slip the first stitch, knit the second, and continue doing slip 1, knit 1 across the heel flap. There's no marker on the other side, but you can see the gap. SSK the last heel stitch with the next stitch on the other side of the gap. Turn, slip the first stitch, and purl over to the other side, purling together the last heel stitch and the first stitch across the gap.
Get what we're doing? We're now getting rid of your gusset increases. As you repeat this, you'll eventually get back down to the original stitch circumference.