ALEXANDER,
You need to install the RP device where it can drain water to prevent a backflow situation if it needs to.
<b>Here's how they work:</b>
During normal flow conditions, the two check valves are held off their seats, supplying water downstream. The relief valve is held shut by supply pressure acting through the internal sensing passage, on the relief valve diaphragm. In the area between the check valves, called the zone, the pressure is maintained at approximately 7 psi lower than supply pressure. Should a back-pressure or back-siphonage condition occur, the second check valve will seal, prohibiting the backflow of water. <b>Should the second check valve become fouled, the pressure in the zone will increase causing the differential relief valve to open to atmosphere.</b> This will maintain the pressure in the zone at least 2 psi lower than supply pressure.
You can install it inside as long as there is a place for it to safetly drain some water without causing damage. Most people install a Double Check valve assembly if they are installing a backflow device in a basement or indoors since they do not drain.
<b>Here is the installation instructions for the Febco 825Y RP backflow device which talks about the draining of the RP device:</b>
http://www.cmb-ind.com/files/products/English/FEBCO/Tech%20Info/825mmrpd.pdf
<b>Here is some more information on Reduced Pressure devices:</b>
http://www.sprinklerwarehouse.com/codes5.htm
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