To make the most basic template, create a new folder in the "templates" folder. Name this folder after your template i.e. "mynewtemplate".
Using a text editor (or dedicated editor such as Microsoft Frontpage) create the files "index.php" and "templateDetails.xml"
To keep things organized, make 2 new folders called "images" and "css". Inside the "css" folder create a file called "template.css".
Although it is fine to place all your CSS code directly in your "index.php" file to start, many web developers prefer to place their CSS code in a separate file that can be linked from multiple pages using the "link" tag.
This is the most basic practical setup.
Outline of folder and file structure: