If a song in your library is applicable for a ringtone, a little bell will appear by the song. Open up the iTunes prefs, (command + ,) and then go to General settings. Check the "Ringone" box if it isn't.
With the song that is applicable for a ringtone, you can make it. It will let you choose what part of the song you want, and the duration (Max 30 seconds i think)
**EDIT**
Oh and to create it, right click the song, and select "create ringtone..."
Remember, it has to be a song that can be used as a ringtone