Hooks are within PHP pages, and the one I used I made and slapped into the XML hook listings page and the PHP file
The hook isn't related to the location of the extra profile field's location on the member page though. That's due to the edits made in the member page in the instructions. The hook code gets the specially marked profile fields from the profile field list. The template edits basically just relabel the box and call the list of marked profile fields.
The dropdown code is manually created by the forum admin who creates it, as per the instructions. It simply calls the profile fields they want.