"Add a reference to MySql.Data.dll" means you need to add a library reference to the downloaded connector. The IDE will link the database connection library with your application when it compiles.
I downloaded the binary (no installer) zip package from the MySQL web site, extracted onto the desktop, and did the following:
using MySql.Data.MySqlClient;
. If you've added the reference correctly, IntelliSense should offer to complete this for you.