Quickstart version for users:

0) Download the absolute newest version. No, really.
  http://freehaven.net/tor/
1) tar xvf it, and then cd into the directory.
2) ./configure (or do the two-line version in the README, if you're on bsd)
3) make
4) cd src/config
5) ../or/tor -f oprc
  You don't need to run this as root, and you probably shouldn't.
6) point your browser to socks4 or socks5 proxy at localhost port
  9050. In mozilla, this is in edit|preferences|advanced|proxies. This
  allows you to test to make sure tor is installed correctly.
7) make sure you've set it up correctly: go to
  http://www.junkbusters.com/cgi-bin/privacy and see what IP it says
  you're coming from. If it works, you should probably go on to step 8,
  to get better privacy.

8) Optionally, install privoxy (www.privoxy.org), and add the line
  "forward-socks4a / localhost:9050 ." (without the quotes) to its config
  file. Then change your mozilla to http proxy at localhost port 8118 (and
  no socks proxy). This step will give you good html scrubbing as well.
  (See doc/CLIENTS for why direct socks gives you less anonymity.)

If this works for you, you can stop reading. Otherwise, see the README for
more details.