It's a standalone tool, like Create-A-World. You download it from here and install it and run it as a separate program.
You'll find good info about Sims pattern creation in the various forums dedicated to the two player-made pattern tools that have been around for about a year now, Delphy's Pattern Packager and TSRW. Those two tools work differently from CAP, but you'll find plenty of ideas and good sources for copyright-free seamless patterns in forums devoted to them, as well as tuts for using image editors like GIMP and Photoshop for making color separations so that you can make differently-colored areas in a source pattern independently recolorable. The Sims 3 community isn't starting from zero as far as pattern making goes.
For instance: http://www.modthesims.info/wiki.php?title=Sims_3:Custom_Patterns, http://www.modthesims.info/showthread.php?t=343264, and others at MTS.
By the way, be aware that just because an image is on the Web doesn't mean you can use it free in any application without copyright violoation... most of what you see (unless it explicitly says otherwise) is protected by copyright. You're unlikely to be sued for using copyright images and uploading em, but I think folks should be conscious of the issue (it's pretty much the same from a legal perspective as uploading a movie clip to youtube).
