The Tank Sensor should always be wired in series with the existing cylinder thermostat. The OWL digital temperature probe then needs to be attached to the side of the cylinder so that temperature control can be provided by the Tank Sensor.
If the existing "stat pocket" is full, then the OWL probe should be located elsewhere - somewhere on the cylinder itself or on a fitting directly attached to the cylinder that is representative of the water temperature within the cylinder. There are a couple of common possibilities:
1) In an unused tapping into the cylinder.
2) On the brass part of the T&P Relief Valve
If you don't connect the OWL temperature probe then you can still operate just on a time control basis (you will need to "Disable Hot Water Safety" - click on Hot Water Settings "gearwheels icon". However please also note that the OWL temperature probe must always be connected to the Tank Sensor, even if not being used, otherwise another safety feature will report a fault and the Tank Sensor will not operate.