You go poop and then only a square of paper to clean youself, what you do?
You put your finger passing through the middle of the paper, like that: http://i.imgur.com/7cK5VTL.jpg
Then you clean you butthole with your finger. After that, you clean your finger with the paper
Oh, thanks for the transcription. I'm not convinced that's a joke though. I think Miyamoto was just giving his coworkers helpful pooping advice.