Press and hold an icon you want to move; all the icons will start moving ("jiggling").
While holding the icon, move it on top of another icon that you want to be in the folder. They should kind of dissolve together and then a folder should pop up.
The iPhone will automatically name the folder based on the category of the apps you've picked, but you can rename it what you wish. To do, tap the name field (at the top of the folder) and type in what you wish.
Repeat this process until all the apps you want to put into folders are, well, in the folders. Then, tap the Home button once to stop the icons from jiggling.
And that's it, you have folders. Hope this helps.
Marilyn