Step 3: Grain
You will want to start with straight-grain wood (which is exactly what it sounds like), where the grain runs in one direction. You can use the ends to determine what direction the grain runs in. The pictures below show you what to look for. Note that the grain can go down slightly... this will be important.
Basic vocabulary is as follows: when you are carving in the same direction as the grain, you are carving with the grain. If you are carving opposite the direction of the grain, you are carving against the grain. If you are carving perpendicular to the grain, you are carving across the grain.
Which way to carve:
You always want to carve with the grain or across the grain. The grain can also run up and down slightly, so make sure you are carving with the grain in the down direction. The next step contains pictures of carvings in each direction for your reference.