You can't apply TIW to tips and if you are on the dining plan you will not need to use it for any items you have prepaid. You can apply it to any off-plan items you purchase, like appetizers (on the basic dining plan) or alcoholic beverages, which will be on a separate check. Anything you use TIW on, you'll be billed an automatic 18% tip for, and the tip is calculated on the pre-discounted amount.
Tipping discussion should be referred to this thread:
http://www.disboards.com/showthread.php?t=2300858