Canonical Link plugin by Bryan Hadaway, inserts canonical link code into header, nothing more needs to be done after the plugin is activated.
The importance of the canonical link is to give Google a clean representation of what you want your URLs to look like and how you want Google to index them, this can also help to clear up duplicate page issues.
The code, together with info is at: http://www.bryanhadaway.com/super-simple-dynamic-canonical-link-code/
Google webmaster central info and video on canonical links at: http://www.google.com/support/webmasters/bin/answer.py?hl=en&answer=139394