How to knit is one of the more common requests for Instructables, and there are so far only a few addressing knitting. This is an attempt to show the basics, and is in no way comprehensive but should get you started.
All you need to learn is some yarn and a pair of needles. In this Instructable I've used medium weight yarn and somewhat large needles, so the interlocking loops would be clearer. Most knitting is done somewhat tighter than this.
Step 1: A Little Bit of Theory
All that knitting really is, is a series of interlocking loops. Let's take a look at the front pic again. I used yellow thread in one row to make it easier to see how the loops interact. The second pic shows the same piece from the other side.
The first pic shows the knit side, and the second pic shows the purl side. A purl stitch (it's spelled with a u but pronounced just like pearl) is exactly the same as a knit stitch except it's worked from the opposite side. The smoother side that looks like interlocking V's is facing you when you are knitting, and the bumpy side that looks like interlocking U's is facing you when you purl.
To start knitting, you'll need to "cast on", or fill up a knitting needle with starter loops. Then you'll knit some number of rows until the piece is the size you want. Then you'll "cast off", or close out all the loops so the knitting doesn't come unraveled again.
There are also varieties of ways to hold the needles and yarn. In this Instructable I'm using and discussing the Continental method, which basically just means the free yarn end is held in the left hand (pic 3). This end can also be held in the right hand, which is more common in the USA but to my mind a bit less efficient.