Your inventory is where all your stuff is. It holds all the items that came with your account when you joined, plus all of the things you've acquired since then.
To see your inventory: Click the "Suitcase" icon on the right side of your screen.
There are two basic folders in your inventory: "My Inventory" and "Library"
- Library has all of the items that are provided by default by Linden Lab. These items can't be deleted. When you "wear" items from the Library, they are automatically copied to your "My Inventory" section. Individual items are copied into the folder by their type (Body Parts, Clothing, Objects). Or, if you "wear" an entire folder (for example, if you "wear" the folder Library/Clothing/Boy Next Door by Renegade Clothing), that entire folder will be copied into My Inventory.
In your "My Inventory" folder, you can copy, move, delete, and reorganize things to fit your own preferences for how to organize, categorize, and find things later.
BEWARE: if an item says "(no copy)" in its name, you cannot copy it, and if you delete it, it's gone forever (unless you Restore it from your Trash folder)
To make objects from your inventory appear inworld, left-click and hold the item from your inventory window, and drag it onto the ground or floor. NOTE: you must be in a location that allows you to do this.
Learn more about organizing inventory from the Official Second Life Knowledge Base