Check the "Match tactics/formation FAQ" for basic info on players and positions. As for how each position effects the game, that will be in "Match engine explained" FAQ section within very soon.

The Game Rules tell you a bit more about legal and illegal formations:

1.1. LEGAL OFFENSIVE FORMATION
Offensive formation is seen as "legal" when:
a) It has all 11 players assigned
b) Has exactly 1 quarterback c) Has at least 7 men on the line of scrimmage
d) Has exactly 1 center and at least 2 players that are assigned a position of either guard or tackle
e) Does not have more than 1 guard (for each side), tackle (for each side), tight end (for each side), halfback (for each available position) and fullback (for each available position). To explain: You can have 3 halfbacks if they are halfback (right), halback (center) and halfback (left). However, you cannot have 2 or 3 halfbacks (center)
f) Does not have more than 2 wide receivers (for each side)
g) Has at least 1 running back of any type and on any position

1.2. LEGAL DEFENSIVE FORMATION
Defensive formation is seen as "legal" when:
a) It has all 11 players assigned
b) Has at least 2 men on the line of scrimmage
c) Does not have more than 1 nose tackle, tackle (for each side), end (for each side), outside linebacker (for each side), strong safety (for each available position) and free safety (for each available position).
d) Does not have more than 4 middle linebackers
e) Does not have more than 2 cornerbacks (for each side)

No problem, we're all new to the game, so I think we should all help eachother :-)

I'll try to give a basic offensive formation primer using the 2 basic formations (I formation and pro set). There are many others but I'm not sure exactly how flexible GI is yet.

You have 3 types of offensive linement (OL):
the center (C)
the guards (LG, RG) - they surround the center.
the tackles (LT, RT) - they surround the guards.

Until you become more familiar with the game (and football in general), I recommend having each of these positions in every formation. It is extremely rare for football teams not to play each of these positions on every play.

You should start out using 1 tight end (TE). You can play him to the left or right and he plays opposite the guard next to the tackle on that side.

This is your line of scrimmage (assuming the TE is on the right).

WR ... LT LG C RG RT TE ... WR

There are 8 players here which is technically illegal (in the NFL at least) but forget about that for now as it is legal in GI.

You need a QB and that leaves 2 spots left for the 2 running backs. Use a fullback (FB) and a halfback (HB). The HB typically carries the ball and the FB usually blocks.

The I formation uses the line of scrimmage as above with the QB, FB (center), HB (center).

WR ... LT LG C RG RT TE ... WR
.................. QB
.................. FB
.................. HB

The pro set uses the line of scrimmage as above with the QB, FB (right), HB (left). You can reverse the positions but you should sync it with your TE (ie if the TE is on the left then the FB should be on the left).

WR ... LT LG C RG RT TE ... WR
.................. QB
............... HB .. FB


Once you get the hang of these formations you can experiment with others. It's a shame you can only use 1 formation per match.

Defense should be a lot easier to get a legal formation. If there are any problems with it, let me know and I'll try and help.

You can use 2 TEs at the expense of a RB or WR. I just posted the most basic formations. You would ordinarily use 2 TEs if you emphasize the running game.