The "1" and "2" mean gears 1 and 2. Switching to either of those keeps the car in either 1, or in nothing above second gear, good for situations where you need to stay in low gear, such as maintaining speed downhill without wearing brakes, or other low-gear situations.
Also to do a burnout, it depends if your car is front-wheel, or rear-wheel drive. I didn't look it up, but I think it's rear wheel, but you should look it up because burnouts on FWD vehicles are impossible.
Also, it depends on your transmission. If you have a stick, it's really easy. However, considering it's a police car, and considering you have a "D" as a shifter option you're definitely running an auto. So.. if you're automatic, your best bet is to press both the brake (really hard) and step up the gas. Find the point at which the brakes kinda stop working and you start moving anyway (in terms of RPM). Then do it again, and release the brake RIGHT before the engine speed (RPM) where your brakes stopped working. This will cause your wheels to spin out, you'll do a burn out, and that's that.
By the way, it wears down your tires and your drivetrain like crazy, and very bad for them both. Unless you want to replace your tires (and axles) very very early, don't do it often.
