Normally we do not think of iron as being flammable, this is because bulk iron doesn't self-sustain its burning like most flammable materials. But the strands of steel wool are thin enough with enough surface area that heat produced is self-sustaining and will continue to burn through if there is enough air present.
To do this, simply pull apart and fluff up the steel wool to separate the strands. Then simply set it on fire. The steel wool should then burn flamelessly creating iron oxide.