To apply an svn patch (your_patch_file.patch) go to the root of your source directory, and place the patch there. (or you can specify the location of the patch with the patch name if it is not placed in the root of the source tree.)
patch -p0
Similarly if you have modified the source tree, and want to create a patch for the changes that you made, from the source root:
svn diff > your_patch_file.patch
your_patch_file.patch will be created inside the root of the source tree. (You may specify the location too, as usual)