Usernames must be unique. They include the prefix in the grey box - e.g. ufpwcrusher.
Enter the user's details - all the fields on this tab must be completed. Depending on your schema you may see more mandatory fields here than first name(s), last name and email address. Checkboxes will appear here if they are marked as mandatory, but do not have to be ticked.
If you get a warning that the email address is in use then you can use search to find it (if you don't immediately see it in the results, check the deleted tab)
These include non-mandatory fields. By default these are items such as group, title, phone number and department but your view may be different if you have custom schema fields.
Featured here is the group selector. If you have many groups, the search will reduce the list as you type. You can also create a new group if what you enter is not already in the list.
Which permission sets should be assigned to the account. Default permission sets are already selected. Clicking on the permission set description will open that permission set.
Once you have completed all pages you can click the button to create the account. Assuming you left the activation option unchanged, the user will now be sent an email with instructions using your template.