Hi Mike,
The picture is correct.
The +12 volt side of the coil goes to the band end of the diode (known as the cathode).
If you had it connected the other way, the diode would conduct and you would essentially have a short circuit.
The diode would probably explode instead of catching fire.
I've seen diodes like this explode before with a big bang. Pieces of epoxy go flying at high velocity.
The function of the diode is to conduct when the coil is turned off and look like an open circuit when the coil is on.
This will dissipate the energy that is generated as the magnetic field in the coil collapses after the 12 volts is removed.
Without the diode, the voltage spike that occurs when the coil is turned off will eventually damage the chip that drives the contactor coil. This diode suppresses that voltage to a safe level.
This is a rather common technique with any DC coil relay or contactor.
There are other suppression circuits that are more sophisticated, but this one usually works well enough.
Adios,
Jerry Pohorsky
former EV-914 owner