When you turn tethering on, you'll get a warning if Bluetooth and WiFi are not enabled. This is OK. Either enable Bluetooth and WiFi or tap the "USB Only" button. You can always come back and tether via Bluetooth or WiFi later if you want.
If you're using USB, now is the time to plug the cable into your computer (you can plug it in earlier, but that will make you wait longer, since it will include two syncs rather than one).
If you're using Bluetooth, make sure it's turned on for both devices. When it is, set your computer to discover new Bluetooth devices and, when it finds your phone, pair them. Confirm the connection.
When the devices are paired, choose "Connect to Network" from your computer's Bluetooth utility (on the Mac, this is the Bluetooth menu in the top right corner) and you should be online. Sometimes there's a slight delay in connecting via Bluetooth, but be patient.
If you're using WiFi, you'll connect to this WiFi network just like any other, using the password provided.