In theory, the Picard Manuever is performed thusly:
1.) The combatting ships must have a distance of several lightseconds.
2.) The ship which is attempting to perform the maneuver (the attacker) accelerates to warp with a heading towards the enemy ship
3.) The attacking ship decelerates to sublightspeed, and engages the enemy
The distance of several lightseconds is required since the enemy vessel must no be able to obtain real-time information on the location of the attacking ship. As the attacker accelerates to warp, he approaches the enemy at faster than light speed. When the distance is closed, and the attacker drops out of warp, the enemy ship will now see two images of the attacker: the real image of the ship in its current location, and an image of the ship in its previous location, as the light which it emitted before accelerating into warp has not yet crossed the distance between the ships. Thus, they might just shoot at the wrong image.
However...
There is a flaw in this theory. On many occasions, we have witnessed that the sensors on a starship must operate at faster than light speeds, as a ship has observed events in real-time through long-range sensors which took place several light years away. Therefore the Picard Maneuver is only useful if the enemy ship is primitive or damaged enough to lack FTL sensor capability, as they would otherwise be able to determine that the attacking ship is no longer at its previous location.
We may assume that the Ferengi vessel which Picard destroyed using this maneuver had already lost its FTL sensors, but certainly in the TNG episode "The Battle", the Enterprise was not lacking FTL sensors (at least no such statement was made in the episode, and no prior damage was taken) so they should have been able to easily defeat the U.S.S Stargazer. Instead, Data was forced to quickly come up with a counter maneuver, involving the measurement of differences of density in the interstellar gas; a feat which apparently had eluded the best strategic minds of the Federation for decades.
Oh well, much of Star Trek doesn't make much sense when you actully think about it.