How to create magento custom module?

Steps to create custom magento module:
Namespace : Zag
Module Name : Mymodule

1.  Create directory Mymodule in app/code/local/Zag
2.  Create Block, controllers, etc, Module directories. Create controller, block and module file as required.
3.  Create module configuration file (app/code/local/Zag/Mymodule/etc/config.xml).
4.  Create xml file (app/etc/modules/Zag_ Mymodule.xml)to enable/disable module and tell magento system from which code pool that module will be taken.

reference: http://jaseir.com/magento/how-to-create-magento-custom-module/