You take a picture with camera. Open gallery, tap three dots in top right corner, select create new album, choose a name, then you have to pick a photo to put into the album! Tap on the one you just took and it will create the album and put that pic into it...
I suppose that I was too accustomed to how Folders work on my PC, and that I could create one, then move files to it...it has to happen at the Photo level, where it gets assigned to an album.