Normally you would create a directory - say ATARI7800 on your SD card and place the contents of the ZIP file in this directory.
I believe with the Atari 7800 emulator that the contents are a few levels in, so you may want to use winzip and extract the files from a few levels down. You are looking for a executable called gp2x7800.gpe - or something similar to that - I can't recall what it is exactly.
In the same directory there should be other directories that the emulator needs - kbd, roms, cfg, etc. These should be extracted to the same directory as the .gpe.
I hope this helps.