According the Emily Post's Etiquette 15th edition, pages 106-107, you ordinarily put your napkin on your lap when you are seated. At a formal dinner, you wait for your hostess to put hers on her lap first. When you are finished with the meal, you put your napkin on the left side of your place (or center if plates are removed). It should not be refolded nor should it be crumpled up, just laid on the table neatly in loose folds, not spread out.. At a formal party, the hostess will indicate that the meal is over by putting her napkin on the table. Guests should not put their napkins on the table before she does.
Other napkin etiquitte: Never tuck a napkin into a shirt, belt or shirt buttons. Also, never wipe your mouth with a napkin, but blot or pat instead.