Menus are located within the Appearance area under Menus. Here you can create new menus, add and delete items, edit existing menu items, and also add menu sub-levels.
You can create new menus or edit an existing menu from this area. To build your menu, you can chose items from the left hand sections. In each of the sections you can tick an item to add it. This option gets added to the bottom of the menu. From there you can drag and drop each option into position. When you are happy with your menu, just click save.
Page and post links are linked within WordPress to that item within your website, you can also create links to external websites on your menus through the custom link option.