Copy the entire /subscribe2/ directory into your /wp-content/plugins/ directory.
Activate the plugin.
Click the "Options" admin menu link, and select "Subscribe2".
Configure the options to taste, including the email template and any categories which should be excluded from notification
Click the "Manage" admin menu link, and select "Subscribers".
Manually subscribe people as you see fit.
Create a WordPress Page (http://codex.wordpress.org/Pages) to display the subscription form. When creating the page, you may click the "S2" button on the QuickBar to automatically insert the subscribe2 token. Or, if you prefer, you may manually insert the subscribe2 token:
Ensure the token is on a line by itself and that it has a blank line above and below.
This token will automatically be replaced by the subscription form, and will display all messages as necessary.
In the Subscribe2 "Options" admin link set the default page ID to the ID of the WordPress page created in step 8.