rjack already gave a nice explanation, just complementing about DIR set up, you always use a long hose, even with singles, long hose is not used because you're with doubles, but because if your buddy needs air, with long hose he will have more mobility, which is true also with singles and also by because breathing from the long hose it is very easy for your buddy to get air from you, he will always know where to go... right to your mouth, and you immediatley get the one bungeed on your chin, that if well placed, you not even need your hands to recover it, although the correct procedure is to use your right hand to take the primary from your mouth and hand it to your buddy and almost simoutaneously recover the back up with your left hand (you always need to first hand in the primary and only then recover the back up, or the long hose will get trapped behind the back up.
About the clip it should be placed in such a way that you can breath from the primary even if it is clipped (as mentioned, to the right chest D-ring), which corresponds to put it in the hose about one open palm from the second stage.
Reasons for clipping the primary already explained... malfunction in the primary, you are breathing from the back up, you are breathing from a stage, isolated doubles could be a reason, but not in DIR set up, there are no isolated doubles in DIR set up, swiming in the surface, or simply using the back up to test it to be sure that it would be ok if needed.
Without a long hose, I agree with other friends that there is no point in using a clip.