Groups are merely collections of friends. But Friendica uses these to unlock some very powerful features.
To create a group, visit your Friendica "Contacts" page and select "Create a new group". Give the group a name.
This brings you to a page where you can select the group members.
You will have two boxes on this page. The top box is the roster of current group members. Below that is another box containing all of your friends who are not members of the group.
If you click on a photo of a person who isn't in the group, they will be put into the group. If you click on a photo of a person who is in the group, they will be removed from it.
Once you have created a group, you may use it in any access control list. This is the little lock icon beneath the status update box on your home page. If you click this you can select who can see and who can not see the post you are about to make. These can be individual people or groups.
On your "Network" page you will find posts and conversation from everybody in your network. You may select an individual group on this page to show conversations pertaining only to members of that group.
But wait, there's more...
If you look carefully when visiting a group from your Network page, the lock icon under the status update box has an exclamation mark next to it. This is meant to draw attention to that lock. Click the lock. You will see that since you are only viewing a certain group of people, your status updates while on that screen default to only being seen by that same group of people. This is how you keep your future employers from seeing what you write to your drinking buddies. You can over-ride this setting, but this makes it easy to separate your conversations into different friend circles.
These private conversations work best when your friends are Freindika members. We know who else can see the conversations - nobody, unless your friends cut and paste the messages and send them to others.
This is a trust issue you need to be aware of. No software in the world can prevent your friends from leaking your confidential and trusted communications. Only a wise choice of friends.
But it isn't as clear cut when dealing with status.net, identi.ca and other network providers. You are encouraged to be very cautious when other network members are in a group because it's entirely possible for your private messages to end up in a public newsfeed. If you look at the Contact Edit page for any person, we will tell you whether or not they are members of an insecure network where you should exercise caution.
On your "Settings" page, you may create a set of default permissions which apply to every post that you create.
Once you have created a post, you can not change the permissions assigned. Within seconds it has been delivered to lots of people - and perhaps everybody it was addressed to. If you mistakenly created a message and wish you could take it back, the best you can do is to delete it. We will send out a delete notification to everybody who received the message - and this should wipe out the message with the same speed it was initially propagated. In most cases it will be completely wiped from the Internet - in under a minute. Again, this applies to Friendica networks. Once a message spreads to other networks, it may not be removed quickly and in some cases it may not be removed at all.
In case you haven't yet figured this out, we are encouraging you to encourage your friends to use Friendica - because all these privacy features work much better within a privacy-aware network. Many of the other social networks Friendica can connect to have no privacy controls.