I was on my high school's crew team and was told it would bother me severely to see people using the erg improperly at the gym. I laughed at the ridiculousness at the time, but it turns out my coaches were right. It really is a great piece of equipment that works all parts of your body (calves, thighs, abs, back, forearms, biceps...) if used properly.
1) start with you arms outstretched holding the handle bar level, and have your knees bent so you're as close the "fan" as possible. Lean forward so that your back is at incline (keep back straight)
2) Keeping your arms and in the same position, push off powerfully with your legs until fully extended.
3) Now lean back (bend from the hips during the entire workout)
4) Pull your arms into your body making sure that you are keeping them level throughout entire workout.
5) Reverse: Extend the arms (keeping them level - your elbows should be an extension of the bars), lean forward (remember to keep back straight), bend legs so you are in starting position.
Point to Remeber: the workout is when you pull away from fan (this is when you would be driving the oar through the water), while you don't want step #5 to be too slow, it is your recovery.