If you've never owned an iPhone before, you can set up the new iPhone from scratch. Or, if you already own another iPhone, you can restore the new iPhone from a backup of your existing iPhone; this allows you to transfer your existing apps and info over to the new phone.
If you choose to set it up as a new iPhone, you can give it a name (ie Liane's iPhone) and then decide which info to sync to the iPhone whenever you connect it to your computer. You can, for example, choose automatic or manual syncing and can decide to sync bookmarks with your desktop browser or your contacts and calendar with Outlook.
If you decide to setup your iPhone as a new phone, move on to step 6.
If you choose to restore your new iPhone from a backup, choose that option and click "Continue." Note that if you do so, your new iPhone will essentially take over for your old one in iTunes; it will have the same name, and all of the data from your old iPhone will be transferred to the new one.
If you decide to restore your iPhone from a backup of an older phone, move on to step 8.