The default yank (or paste) action with the middle
mouse button is to insert copied text at the current cursor
position. This requires that the cursor is moved to the
new position before the mouse middle button is pressed.
This behviour can be changed to "yank" to the position
of the mouse cursor when the middle button is
pressed. To do this then perform the following
M-x user-setup (or Help->User Setup)
Select the "Mouse" Tab
Change "Button" to "Middle"
You will see the default option is "No Move Yank"
Change this to "Move to Yank"
The Yank or paste will now be performed wherever
the mouse cursor is when the middle button is pressed.