In the Android SDK and AVD Manager click virtual devices in the left pane and click new. Give the Emulator a familiar name. Next select the proper target android level. This is the version of Android the emulator will run. Then enter the size of the virtual SD Card to be created for the emulator. There are also a number of device functionality emulators included that can be added. These provide mock versions of the camera, gps, etc to be developed against. Finally Click create AVD. Once the AVD has been created a dialog box will inform you.
Physical devices can also be used to develop applications against. They are faster and less resource intensive than running the emulator. Once a device has been properly configured and is attached to the system they will appear in the Android SDK and AVD Manager. In Linux udev must be setup for the phone to be properly detected.
This is a simple addition to /etc/udev/rules.d. Create a new file /etc/udev/rules.d/51-android.rules containing one of the following lines. The SYSFS{idVentor}== value needs to be adjusted to the correct USB ID for your device. Depending on your linux distro one of the following 2 lines:
SUBSYSTEM=="usb_device", SYSFS{idVendor}=="22b8", MODE="0666"
OR
SUBSYSTEM=="usb", SYSFS{idVendor}=="22b8", MODE="0666"