doc: Update VSCode extension docs (#417117)

pkgs/applications/editors/vscode/extensions/README.md

@@ -2,10 +2,10 @@
 
 ## Conventions for adding new extensions
 
-* Extensions are named in the **lowercase** version of the extension's unique identifier. Which is found on the marketplace extension page, and is the name under which the extension is installed by VSCode under `~/.vscode`.
+* Extensions are named in the **lowercase** version of the extension's unique identifier which is found on the extension's marketplace page, and is the name under which the extension is installed by VSCode under `~/.vscode`.
   Extension location should be: ${lib.strings.toLower mktplcRef.publisher}.${lib.string.toLower mktplcRef.name}
 
-* Move extension to a discrete directory whenever the extension needs extra parameters/packages (at top of the file) or other files (such as patches, update script, components). Global index file parameters/packages should be utilities shared by many extensions. Extension specific parameters/packages should not be in the global index page.
+* When adding a new extension, place its definition in a `default.nix` file in a directory with the extension's ID (e.g. `publisher.extension-name/default.nix`) and refer to it in `./default.nix`, e.g. `publisher.extension-name = callPackage ./publisher.extension-name { };`.
 
 * Currently `nixfmt-rfc-style` formatter is being used to format the VSCode extensions.
 
@@ -39,4 +39,4 @@
       > vscode-extensions.publisher.extension-name: 1.2.3 -> 2.3.4
       >
       > Release: https://github.com/owner/project/releases/tag/2.3.4
-  - Multiple extensions can be added in a single PR, but each extension requires it's own commit.
+  - Multiple extensions can be added in a single PR, but each extension requires its own commit.