Press and hold any app icon until they all start to wiggle. then just drag on app on top of another. It will create a folder. Continue dragging apps onto the folder icon to add more.
Be careful not to tap the x's on the icons, or you will delete the app.
When done, press the home button, and the apps will stop wiggling.
To rename the folder, open it by tapping on it. Then hold an icon until they start wiggling. The folder name will become a text entry field where you can edit the folder's name.