Teflon tape is a delicate white strip of filmy material that's used to wrap plumbing pipe ends before screwing on the fittings that will attach to the pipe. The tape coats the threads of the pipe and helps form a seal with the fitting to prevent leaks. It can be a little frustrating to work with, because it's so flimsy, but once you have a leak-free pipe, it will be worth it.
Make sure the threaded end of the pipe is free of dirt or debris.
Pull out a small length of the tape from the roll and, with your thumb, press it against the threads right at the end of the pipe, but not over the opening. The tape should be positioned so that when you unwind the roll around that pipe, it will be going in the same direction that the fitting to be applied to the pipe will go. (Normally, this is clockwise.)
Unwind the roll of tape around the pipe clockwise, while still holding the end of the tape against the pipe threads with your thumb. The first turn should double over the end of the tape and cover it completely (take your thumb off after the roll comes around). Then move down the thread as you continue wrapping. Each course of tape should overlap the one before it by about half the width of the tape. Keep tension on the tape as you wrap it, so you can see the shape of the threads through the tape.
Continue wrapping until you've covered the entire threaded part of the pipe. Then hold your thumb against the wrapped tape to hold it in place as you pull at the roll to tear off the piece. Press the torn end of the piece into the threads with the rest of the tape.
Screw the fitting onto the pipe.