Most printers use an 1/8" bleed edge, and recommend an 1/8" safe area around the cut edges. The link has a dotted line indicating the bleed edge, you'd want to keep text and important images within an 1/8" on the inside of the solid outer edge to be within the 'safe area'
These sizes have been what's used by every print house I've ever worked with, check with your printer for specifics. Oh, yeah, you'll want to use at least 300dpi, and work in CMYK color mode too...
All this info is explained in detail in the larger photoshop template file in that linked zip.