Yes, you run the signal through the cap, instead of bleed signal to ground, if that makes sense. If you only want to alter the tone of a specific pickup, you'd put the cap between the pickup and the selector. If you want it to apply to the whole guitar, you put it anywhere between the selector and the output jack.
Good values to use for this are 0.4 to 1 nanofarad, I use .68 usually.
Another thing to do is have a trim pot in parallel with the cap, this lets you allow some signal to bypass the capacitor, so if the .68 nF cap is killing too much bass, just decrease the resistance on the trim pot to regain more bass. A good trim pot value would be anywhere from 200k ohms to 500k, since most the perceivable difference will be under 100k anyway. Hook it all up with alligator clips first so that you can settle on values before you solder. You might want to measure the resistance of the trim pot when it's at a spot you like and make note of it in case you want to just use a fixed value resistor instead, or do the same thing on another guitar later on and save some time. You can get all these parts on ebay for real cheap.