the prefix specifies the "base directory", so everything that gets installed will get installed relative to that directory. this means that, in this example the modules will go somewhere in "/tmp/myperl5/lib/perl5/site_perl/5.8.6" (depending on your perl version number), manpages will got in "/tmp/myperl5/man/...." etc.
If you then want to use the libraries need to make sure the perl interpreter knows where to find them: you can set the PERL5LIB environment variable to "/tmp/myperl5/lib/perl5/site_perl/5.8.6" or put use lib '/tmp/myperl5/lib/perl5/site_perl/5.8.6'; in your code.
And yes, you can basically use any directory you like, though dirs with spaces in their name tend to cause confusion.
If you want to have more control over which parts of the installation go where, take a look at the ExtUtils::MakeMaker documentation.
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