Install distribute by downloading and running distribute_setup.py. This will make easy_install available, and from there you can install pip with easy_install pip. Then you can run pip install CAGE. Using pip to install things is a lot easier than messing with manually running setup.py, because pip can do things like:
automatically resolve dependencies
show you a list of all installed packages and their versions
install a set of specified packages from a requirements.txt
upgrade and uninstall packages
work with virtualenv
If you're on Windows, the one downside of pip occurs when there are C library dependencies, as pip will want a C toolchain installed so it can compile things. If that is the case, then there are two options. If there are precompiled binaries on PyPI, then just run easy_install package instead; easy_install knows how to use binary packages. You can also check Christoph Gohlke's site for executable installers of many binary packages. These can also be installed by easy_install if you want to use them with a virtualenv (just point it to the path of the .exe) or you can click and run if you don't care about virtualenv.
The main point is that no matter what route you choose to install packages, at no point are you ever moving around files by hand. You need to get out of the mindset of "I extracted this archive, where do I put these .py files?" That's not how it works. You're either running pip, running easy_install, running setup.py, clicking on an installer package, or using your distribution's installer. At no point are you ever doing anything by hand with the files directly.