Yes as the others have said, you play so that your notes are in time with the metronome beats. Try to play so that your notes and the metronome sound as one, e.g. you can try pizzicato so you can hear the start of the beat clearly. Then see if you can play so close to the beat that the two sounds merge.
That's one excercise you can do anyway. It's great for honing your sense of time and short time intervals and how closely you are in time with other musicians.
You can also try playing just before the beat - then get as close as you can to the beat while still staying before it - and ditto playing just after - then finally play exactly on the beat as exactly as you can. This all helps you to be more flexible.
In fact, it may be interesting to know that in ensembles some musicians will play intentionally before or after the beat like that too - e.g. percussion often just before, and a solo musician may be well ahead or behind the rest of the band or orchestra, depending on the feel of the music. You might think that would sound bad, but it sounds great - I think what makes it sound good is that they do it consistently, so if you are ahead, you stay ahead for as many measures as you want to, not just go all over the place as a beginner does. After practicing a bit like this you can try listening to music and see if you can hear if the musicians are all on the beat or some are in front or behind it.
Yes you can overdo metronome practice. The metronome has a steady clock like click - while human players play with a lilt, so the beats are slightly uneven and the music "dances" more. This is something you just do naturally. You don't feel the music make you want to dance to a metronome or a clock in the way you do when a musician plays who has an excellent sense of rhythm.
But the metronome is great for learning to keep a steady tempo. Also you can use the merge with click exercise to learn to hear the moment of the beat more precisely - this helps you to play better in time with other musicians as well. Another nice thing you can do is to set the metronome to go silent for a few measures, and continue playing. When it comes back again then see if you are still in time with it - this is a test of how steady a tempo you can keep.
Also good if you can set it to a gradually changing tempo as that's another skill that is well worth leaning,
Anyway I have written a metronome program that has many features to help you play in time. Particularly the "Gravity Bounce Conductor". It is like your own software conductor to help you to play in time with the metronome, you can also switch the sound off and use it as a silent metronome.
It also has a gradually changing tempo feature, options to add a lilt or swing - so varying the timing so that it is less of a steady tick and more natural to play along with - and a GO SILENT feature so you can set it to go silent for a few meausres and see if you can come back in time with it - and many more features. Had a good (printed) review eariler this year in Sound on Sound magazine and has lots of users who are very keen on it.
So you can check it out here:
http://bouncemetronome.com