Tiling around Tub Surrond

We installed a two piece tub and surrond and now I want to put a border around the outside.

I'm confused about the mounting section that is recessed in by an inch. Do I put mortar over this section or just on the drywall? Hopefully this makes sense.

often, a recess is designed to butt the drywall up to the edge. Depending on the size of the tile, if most of it will be supported on the wall, you don't need to put anything in there. You also may want to use caulk between the tile and the surround since they will expand and contract at different rates, and grout is likely to crack there. An alternative would be an engineered expansion joint. One manufacturer or those is www.schluter.com.