I started an online quiz and this was the first question. I feel pretty stupid because I honestly don't even know what's going on. Why are the dots changing? Are the letters being placed on the paper or inside it? What am I being asked exactly?
Attempting to answer your questions in reverse order...
- What am I being asked exactly?
It looks like you are being asked which of the options (1, 2, 3, 4, 5, or 6) should fit in the white background area to maintain the most logical pattern.
- Are the letters being placed on the paper or inside it?
If by letters you mean the numbered option you choose (each of which looks like a cut-out piece of paper) the shape is being used just to let you know where the option would go - so it is being placed there, it could just as well be an X marking the spot or a square with a question mark inside.
- Why are the dots changing?
That is just the nature of the pattern. Once you have understood the answers to (3) and (2) above it should be quite easy to see that the most logical choice is...
Option 6 - four dots (effectively completing the sequence of number of dots
You are probably asked to find what comes next in the sequence, which is
6. The pattern is 1,2,3, and now 4 dots in the square, going clockwise.