Both O-rings are for the filter housing cover. The small one is for the drain plug, the big one goes around the cover itself. Make sure you lube them with some oil (just like a regular spin-on filter O-ring) before installing.
Per the manual, what you do is first loosen the drain plug (Allen wrench required). Then unscrew the cover at least one turn (you should feel the O-ring release). Then remove the drain plug completely and allow the oil to drain out. Done this way you have almost no mess. Make sure to use an appropriate sized oil filter wrench when removing or replacing the cover, otherwise you run the risk of cracking it.