The Play Area
Above is a sample layout for your cards. Where exactly you put each section doesn't matter, as long as the cards in each play area are grouped together.
This can also be found on page 7 of the basic rulebook.
A - Your Deck
Your deck is always face-down and in the order it was when the game began. You may not reveal any cards from your deck, but any player may count the number of cards you have remaining. At the end of any turn in which you have no cards left in your deck, you are out of the game.
B - The Smoked Pile
This pile contains all the cards that have left play but may be brought back into play or otherwise affect the game. Cards in your Smoked Pile contribute their resources to your resource pool. Cards in your Smoked Pile are kept face up and any player may look through your Smoked Pile at any time.
When a card is smoked, place that card in its owner's smoked pile, no matter who controlled it at the time.
C - Your Toasted Pile
The only thing that is truly out of the game is your Toasted Pile. These cards are removed entirely from play and cannot be brought back.
The Toasted Pile is kept face down and any player may look through any Toasted Pile at any time. When a card is toasted, place it in its owner's Toasted Pile, regardless of who last controlled it. Cards you discard also go to your toasted pile, even though discarding a card isn't considered toasting for game purposes.
D - Your Burned-for-Victory Pile
This pile contains cards that count towards your victory conditions. This cards are not in play.
These will usually be Feng Shui Sites that were burned for victory, but may contain other cards placed in the pile through game effects.
E - Your Hand
When you draw cards from your deck, they form your hand. Your hand size is six (6) which is only checked when you draw cards at the start of your turn.
You never have to discard down to your hand size.
F - Power
Power is the currency of Shadowfist and how you bring cards into play. Power is generated during your Establishing Shot and can be gained through other cards.
Any power left over at the end of your turn stays in your pool and accumulates from turn to turn.
G - Cards in Play
Your Characters, Edges, Feng Shui Sites, Sites, and States are all played into the play area.
Sites and Characters are placed at Locations. A location can contain two sites, one in the front-row and one in the back-row, and any number of Characters. A Location with at least one Site is called a column. If you control no Sites, your Characters are considered at the same undisclosed location.
Locations begin on the left side and work their way to the right. If the last site at a location is removed, all locations are shifted to the right to fill the gap.
Effects only affect cards that are in play (unless the effect says otherwise).