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There should be some coals touching the side of the can. It needs to be hot to create smoke. If the coals are under the can, the surface of the chips exposed to heat are the flatter, wider sides of the bottom-most chips. This tends to be a rather efficient block for hotter temps in the upper-most chips. The thinner sides of the chips which are facing the sides of the can will conduct heat better to the inside, thus more quality smoke. The edges of coals turn grey first for this same reason. If you are using a real low temp, put some nail holes in the bottom of the can to create some airflow, or mix in a few dry chips. I've never soaked chips in anything but water, so I'm not sure what the effect of alcahol will be on the qaulity and flavor of the smoke.
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