The prong should fit high on the neck, slightly below the ears, here's a link for a better example:
The prong is only used for corrections, it should not be pulled on constantly. A quick snap or pop is the correction if you need to get your dog to heel. Instead of a prong, you may want to get a tab ( a really short leash), my daughter uses this when she really wants control, the dog close to her (she is petite and does not like a dangling leash).
You can also use treats, when you are approaching other dogs, start giving treats, make sure you have a good distance between you and the other dog, give treats while passing the dog, and if your dog has paid attention to you instead of lunging at the other dog, then more treats and lots of praise.
Hopefully using a few different methods depending on your environment will help. The thing you should be careful about when using a prong around another dog is that, if you pull back or do too many corrections around another dog, your dog may associate seeing a dog with a negative reaction. That is why I like the treats better.
I was going to try to find a youtube video for you for using a prong, but the video showed the prong just above the shoulders (wrong position!) so that didn't work. Hopefully other members might have some good video resources for you.