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Click "Next".
For example, for a Dragon 50K, choose the Spartan-2 XC2S50 device in TQ144 package.

Click "Next".

Click "Next" until "Finish".
ISE shows you the empty module template:

Type the following text (as-is, this is case sensitive):

and save.
With the "ledblink.v" file selected in the Project browser, double-click on "Assign Package Pins"

ISE analyses your design, and after a few seconds, it asks you if you want to create a "UCF" file. Say "Yes".
A new software ("Xilinx PACE") opens. Set the pin assignment (for example, with a Dragon board, assign P18 to clk and P51 to LED).

Save the UCF and close PACE.
With the "ledblink.v" file selected in the Project browser, double-click on "Generate Programming File"

The design compiles, and after a few seconds, the design is ready to be downloaded into the FPGA.
Go to Xilinx's ISE 6 Software Tutorials or ISE 7 Software Tutorials pages.