whatever you can afford... if you want to boil it first that is up to you... just make sure you let it cool right down first, lol.
The liquid litmus is used by taking a sample of your water in a test tube (or other similar object) and pouring in a couple of drops of litmus. The water will change colour, and from the colour you will be able to determine the pH of your water fairly accurately by checking it against a colour chart.
If you're in soil look for an orange colour with a slight yellow to it. So it will be a light orange and not a dark one. In hydro (although in hydro you should really get a digital meter) you're looking for an orange colour with more brown in it.
digital is better and they are only cheap these days.