First, if the yarn is already rolled into some different form, you want to unroll it so that you just have one long, long string. You can leave it in a neat pile if you want; try to keep it organized and untangled so that you don’t make a mess for yourself later!
Now take the end of the yarn and put it between your index and middle fingers. Righties, I suggest using your left hand, and vice versa; lefties, use your right hand! Take your other hand (your dominant one) and start wrapping the yarn around both your index and middle fingers (do it loosely! You should be able to get it off, and you don’t want to cut off circulation either).
Once you have a small “band” of yarn around your two fingers, slip it off and now start winding the yarn around this. Change directions every once in a while while you are winding. It may take a while at first, but this is an effective way to wind your yarn so that you don’t have to worry about tangling as you work.
Tips and Warnings:
When wrapping the yarn around your fingers, wrap it somewhat loosely. You don’t want to cut off circulation, and you still have to get it OFF your fingers!
Don’t just skip step one and try to unravel a store-bought ball of yarn as you go. You’ll likely get tangled in something and have to start all over again!