How does Liliana of the Veil ultimate work?

I just tried to do Liliana of the Veil 's ultimate move, and I don't really understand what to do so I botched it and let the computer only lose one permanent.
http://www.slightlymagic.net/forum/viewtopic.php?f=26&t=5678&p=74270&hilit=liliana#p74270 - Only thing I found was this comment when I searched the forum.
I guess this is how I thought it would work:

Clicking the OK button to add to pile one, and clicking cancel to add to pile two.
http://www.slightlymagic.net/forum/viewtopic.php?f=26&t=5678&p=74270&hilit=liliana#p74270 - Only thing I found was this comment when I searched the forum.
I guess this is how I thought it would work:

Clicking the OK button to add to pile one, and clicking cancel to add to pile two.