Connect a physical keyboard via USB-OTG adapter to the phone and open a terminal.
The guidelines on https://docs.waydro.id/usage/install-on-desktops do not work straight away.
In the terminal, check the Install Pre-requisites, the 3 packages should already be installed with Ubuntu Touch:

sudo apt show libcurl3
sudo apt show python3 | more
sudo apt show lxc

Install ca-certificates, if not already installed:

sudo apt install ca-certificates

Install Waydroid with the following commands:

sudo -s
sudo mount -o remount,rw /
apt update
apt install waydroid -y

Start the init process (this downloads LineageOS 17.1, unpacks, downloads, ...):

waydroid init 

Then start the waydroid container service:

sudo systemctl start waydroid-container

or just simply reboot.

Start Waydroid: Click the Waydroid icon, a LineageOS Android system opens.
Stop Waydroid session and containers:

waydroid session stop
sudo waydroid container stop # not necessary

App installation: You can install e.g the F-Droid store or other stores. With the browser, download the apk from e.g. https://www.f-droid.org/ and click it from the file-manager. F-Droid store app installs (now you can install further apps easily).

Remove unwanted Waydroid-app icons from Ubuntu Touch:
Modify each desktop-file in /home/phablet/.local/share/applications/waydroid....
Add 1 line with “NoDisplay=true” to those you do not want to see.

Stop Waydroid with icon: Add a desktop-file in
/home/phablet/.local/share/applications/waydroid-stop.desktop

[Desktop Entry]
Type=Application
Name=Waydroid Stop
Exec=waydroid session stop
Icon=/usr/lib/waydroid/data/AppIcon.png

Only 'waydroid session stop' is necessary. You need to keep the container started to launch Waydroid again via menu icon.

File sharing between Ubuntu Touch and Waydroid LineageOS: Go to ~/.local/share/waydroid/data/media/0/ (then e.g. Download)
Before copying:

sudo -s # not necessary: sudo mount -o remount,rw /

After copying a file to the Waydroid location, you may want to change its file permissions to match with other file permissions in that location (compare with other files in here). LineageOS file manager now can easily work with the copied file.

chgrp 1023 <file>
chown 1023 <file>
chmod g+w <file>