Instructions
From your pod, walk up to the controller and press "square" to access the pod computer and bring up the "LittleBigPlanet" title screen.
Out of the three available options (InfoMoon, LittleBigPlanet and MyMoon), scroll to the right to highlight "MyMoon" and press "x" to select "MyLevels." On the "MyMoon" surface, blank craters represent blank levels, and green craters represent levels that have already been created and saved.
Highlight one of the blank craters and press "x" twice to bring up the template menu. Here, you can either start from scratch with a blank level or begin with one of the available templates. Press "x" again to open the level editor.
Press "start," scroll down to "save level" and press "x" to save your level. You can also select "save level as..." to save your level on a different crater. At this point, feel free to alter the name and description of your level by selecting "About My Level" from the same menu.