The best location for your heater is going to be based on your specific boat and engine room configuration. Since heat rises, it is best to get the heater, and airflow to start out as low as possible in the bilge. Air will circulate throughout the engine space, but it is best to direct the airflow of the heater toward the equipment you wish to protect.
Do not install the heater where it may become submerged before bilge pumps evacuate any standing water that accumulates in the bilge. Remember, even boats on lifts or trailers can collect water from rain/snow events.