It depends on the shape you have but in general, you just wind yarn around pegs in figure eights to make flowers. Then you sew or crochet flowers together.
Here are directions for a round flower loom (two rows of twelve pegs each, and a hole in the middle):
1) Start with the wool in space no 7 and secure in the slot below. Take the wool across and round peg no 1 and then round peg no 7. This should form a figure of 8.
2) Take the wool across and round peg number 2.
3) Then bring it back and around peg number 8, back across and around peg no 3
4) Continue in this way until all the pegs have been used and each peg has three loops. You should finish with the yarn in space 6 then secure in the slot below peg 7 and cut the wool leaving 3 cm of spare wool.
5) Using a contrasting color wool secure in the slot below peg no 7. Continue exactly as before but use the inner pegs. Each inner petal should also have three loops. When this is completed secure in the slot below peg no 7 and cut as in 4.
6) Cut a piece of wool approximately 41 cm long, and using thin wool, thread a needle and stitch the petals to secure. Each petal should have one stitch across. Keep the stitches as close to the centre of the flower as possible. Gently remove the flower from the loom by pushing from the back. Fasten the wool thread securely on the wrong side. Cut the loose ends as close to the center of the flower as possible.
Hope this helps!