The HME (Heat /Moisture Exchange), the clear plastic cartridge with the blue inside, is a portable humidifier that ships with the Z1. How it works is that the blue material in the middle absorbs the moisture in your breath when you exhale so it is available to be picked up in the air when you inhale.
It works best if you install it as close to the mask as possible. Some nasal pillows come with a short tube that does not detach, so the HME attaches between that tube and the tube that goes to the CPAP machine. Otherwise attach it between the mask and the tube.
The HME should last up to 7 days if kept in a sealed plastic bag between uses. Do not open the plastic bag until you are ready to use it. Discard the HME when it is no longer providing enough humidity. Do not add water to extend its life.