The first thing that you need to realize is that you must have at least one Primary DOS partition on your hard drive before you can use Partition Magic on the drive. If this is a drive that is already running Windows then you already have it partitioned, because  a drive must contain at least one  partition in order to be formatted. If this is a brand new disk it is likely that you will need to partition it first. This you can do with FDISK. For information on how to use FDISK take this link Using FDISK or open the enclosed file called "fdisk.htm" with your bowser . Once you have partitioned and formatted your drive you can install Windows 98 and install PM. Or if you have the Rescue Disk already set you can run PM 5.0 directly from DOS by booting with Disk 1 and then inserting Disk 2 when prompted. The Rescue Disk set contain mouse support to make this easier. The DOS version has all the features of the Windows version. There is a slight difference in the screen but this is only cosmetic. In fact most of the work PM 5.0 does is in DOS anyway.

Once you have installed PM 5 to your Windows 98 system you MUST create the Rescue disk set  before you attempt to make any changes to your Hard Drive. If something goes wrong and you can't boot to Windows you will be able to use the Rescue Disks to troubleshoot. In fact you can run Partition Magic 5.0 from the Rescue Disks and do all the partitioning you wish to with these two disks.

When you first launch PM 5.0 you will see a screen similar to the one below in Figure 1. It shows one Primary partition that has been formatted as FAT32. If you currently have programs installed then the bar will have a Yellow bar inside that shows how much of the partition contains data. A White bar, as below, indicates no data and a gray bar will indicate an Unformatted partition.

Figure 1

To create additional partitions you need to select "Operations" and then select "Resize/Move" as in Figure 2 below.

Figure 2

The Resize/Move screen will appear as in Figure 3. You will want to create new partitions beginning on the left and moving to the right. In the box beside "New Size" enter the size you wish your first partition to be. In the example below I want the first partition to be 2 GB so I entered 2000 in the box. This will be the partition where I will install Windows. The Free Space After will be automatically calculated. Next click OK and you will returned to the Main Screen.

Figure 3

As in Figure 3a below you now see that you have one Primary partition that is identified as C: 
The Details bar tells you 
Partition - and allocated drive letter - C: 
Type - FAT32 in this case
Size - in MBs this maybe slightly larger or smaller than the number you entered in the New Size box in Figure 3.
Used - in MBs (even a newly created partition with no data has hidden info in it that the BIOS reads) 
Status - if the partition is Active, Hidden etc.
Pri/Log - whether the partition is a Primary or a Logical partition

Figure 3a

Next you can create more partitions in the Unallocated partition. First click on the Unallocated (gray) partition then select "Operations" again. This time choose "Create" as in Figure 4 and the Create Partition screen will be displayed as in Figure 4a below. 

Figure 4

When the Create Partition screen opens you can choose the type of Partition you wish to create. In this case I am creating a "Logical Partition" as a storage space for Data. However a person could choose to create another Primary Partition if they wished to set a dual boot system. For Partition Type enter "FAT32" and you can enter a Label if you wish. Select the Position to be "Beginning of freespace". When you click OK you will go back to the PM 5.0 Main screen. You will notice that the Logical Partition is enclosed in and Extended Partition which was automatically created as in Figure 5.  Extended Partitions house Logicals. It can house many Logical partitions of different sizes. (As a note if you wish to Delete all of your Logical Partitions you will also need to Delete the Extended Partition)

Figure 4a

Figure 5

Take note of the Details. You will notice that none of the Partitions are Active (see the Status). You must set at least one Primary Partition as Active in order to install or boot from it. To do this click on the C partition and then go to "Operations" and select "Advanced" and "Set Active" as in Figure 5a below.

Figure 5a

Finally your PM 5.0 Main screen should appear as in Figure 6 below.

Figure 6

Changes do not take effect until you click "Exit". Once you click Exit you are committed so be sure you want to make all the changes. Some changes can only be accomplished from DOS. PM 5.0 will prompt you to close programs etc which you should have done first anyway and will boot into DOS. This doesn't work in Millennium and will not work in Windows 2000 Pro without the PM 5.01 Update. If you wish to Discard changes you can go to "General" and click "Discard changes".

You can speed the change process up considerably by going to "General" and click on "Preferences" and the check the box to "Skip Bad Sectors" as in Figure 7 below. You will also notice that you can set your drive as "Read only" from here which can prevent changes from being made to a disk.

Figure 7

Good Luck! and Happy partitioning! If you plan to setup multiple Operating Systems you will need to install Boot Magic to enable you to switch the boot partition. I prefer another boot manager called BootIt Direct that can be found here BootIt Direct and you should also check out Lee Chapelle's great site on partitioning

This is what a completed partitioned Hard Drive on my system looks like. The Yellow Bars indicate the amount of data in the partition and the White Area is freespace.

More information on partitioning can be found here