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.
  (If you have a personal firewall, be sure to allow connections to
  localhost port 9050.)
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 -- don't forget
  the dot) 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 here******

If you got the source from cvs:

  Run "./autogen.sh", which will run the various auto* programs and then
  run ./configure for you. From there, start at step 3 in the quickstart
  list above.

If the quickstart doesn't work for you:

  If you have problems finding libraries, try 
    CPPFLAGS="-I/usr/local/include" LDFLAGS="-L/usr/local/lib" \
    ./configure
  rather than simply ./configure.

  Check out the list archives at http://archives.seul.org/or/dev/ and see
  if somebody else has reported your problem. If not, please subscribe
  and let us know what you did to fix it, or give us the details and
  we'll see what we can do.