http://www.ross-tech.com/vag-scope/TDIGraph.html

Step by step:

Make sure you are using thecurrent version of VCDS or a fully registered version of VCDS-Lite)
Start your engine and make sure the coolant is up to normal running temp. TDI engines may take a long time to warm up at idle.
Start VCDS or VCDS-Lite
Click [Select]
Click [01-Engine]       
Click [Meas. Blocks - 08]
Go to group 000 (Group 004 for V6 TDI - VCDS-Lite does NOT support this)
Click [Switch to Basic Settings] 
Click [TDI Timing]
Select your engine code from the drop-down menu
It is normal for the glowplug light to flash and for the engine sound to change slightly while using this function. This thread may be helpful as well: http://forums.tdiclub.com/showthread.php?t=163435
The TDI Timing checker does not work in Shareware Mode since Basic Settings is not available. When using VCDS-Lite, only ECU's that have timing checked in Basic Settings group 000 will show the TDI Timing button. For V6 TDI ECU's that use Basic Setting in group 004, refer to the factory repair manual for specs.
The TDI Timing Checker works only as a “plug-in”. You must start it using the [TDI Timing] button in VCDS/VCDS-Lite. Starting it any other way will result in error messages and it won’t work.