Suppose you want to add the AX register to the BX register: "ADD BX,AX". The microcode moves the register specified by N (i.e. BX) to the ALU's temporary A register. BX, specified by N, moves to tmpB. The sum Σ is moved to BX (N). The ALU op (XI) comes from the instruction.
Thus, a simple add takes 3 micro-instructions (and 3 clock cycles). The microcode is very generic: it doesn't know the particular registers, the ALU operation, or the operand size. It just specifies the steps and the hardware figures out the details. This keeps microcode small.