In this pattern step what do I do with the bodice lining?
In short, you get the lining out of the way as much as possible. Fold it up as far as it will go without causing the outer layer to wrinkle too much.
The instruction is to sew both skirt layers (outer and lining) to the outer layer of the bodice. The seam allowance gets pressed towards the bodice (upwards, from the finished dress perspective).
There should be a step (not necessarily the next, but probably soon) where the lining gets placed back to the original position again, the seam allowance folded inwards, ironed and sewn down, so that all excess material is hidded inside the bodice part. This makes the seam look nice from the inside as well and is more comfortable than having the seam allowance bits directly against your skin.