Connect one end of diode to ground, other to pic input and pull up resistor. Just like in schematic on page 8.
They suggesting to connect diode to ground thru mosfet to minimize current consumption. When mosfet is turned on, there is about 0,6V on pic input, and that voltage won't change.
You do not need to use mosfet, you can connect diode to ground permanently, or connect to output pin.