Set up web server hosting the folder you chose. Although IIS is a requirement for production sites, it runs fine for development in IIS Express.
Set up file permissions for the folder. For development server it is okey to have full read/write/modify permissions for the process serving the web page (AppPool or Network service)
If you want to set up Umbraco on Sql Server or Mysql, download and install it. Make a new database for Umbraco, and remember Connectionstring details, inccluding database name, user and password
Open your site at localhost, and follow the wizard to set up your site with the database.