Creating subtitle Files in subtitle workshop
Firstly you need your file to be encoded. This may be a Xvid file or an Mpeg1.
Then download Subtitle workshop and install it.
Loading a video file
To load a video file simply click the "Movie/Open" menu or press the [Ctrl]+[P] keys, or drag and drop an existing subtitle if in the same folder as the video file. If you get the "File is not a valid video file" error message, make sure you have the right codecs installed. If you don't, download Coda Codec Pack, it should fix most of the playback problems.
Create a new file
Using Subtitle Workshop you can easily create new files from scratch, and then save them in any format. To do so, click the "File/New subtitle..." menu or press [Ctrl]+[N] keys. Once you have done this, you can start adding subtitles, and then save the file by the "File/Save" menu or pressing [Ctrl]+[S] keys.
When you get the miriad of options, I reccomend SubRip format which creates an *.srt file.
Give your file a relevant name. Remember that if you want subtitles to come up automatically in some players you should name it the same name as the Video file in the same directory.
So if the Video file is here c:/geekvids/freesoftwaresong.avi
Then save your subtitle file here c:/geekvids/freesoftwaresong.srt
Creating the Individual Titles
You just need to press the Insert key or click the "Edit/Insert subtitle" menu. The subtitle will always be added right after the focused item. The default duration of the new subtitle is one second, and the start time of it is always going to be the final time of the previous one plus 1 millisecond. If you are adding the subtitle in a blank list, the initial time of it will be zero.
If you want to insert a subtitle before the selected item, press [Shift]+[Insert] keys or the "Edit/Insert before" menu.
Create each subtitle line
This can be done by playing and pausing the Video by clicking the play/pause button (and then pressing the [Ins] key) 
And setting the In and Out points for the Video 
Adding the Text in the Text Box 
Afterwards if needed you can Manually edit a subtitle
Every subtitle is composed by three parts:
a. The initial time - the time in which the subtitle is shown.
b. The final time - the time in which the subtitle is hidden.
c. The text - the subtitle itself. 
Subtitle Workshop lets you easily edit any of these fields.
To edit the initial time just click the "Show" field, set the time (or frames) you wish and press [Enter].
To edit the final time click the "Hide" field, set the time (or frames) you wish and press [Enter]. Note that you can also edit the final time of a subtitle by changing the "Duration" field.
Additionally, you can edit any of this time values using the Up-Down buttons at the right side of each text box.
To edit the text, simply click the "Text" box and write the desired text. In the list of subtitles, the character "|" (pipe) represents new line.
When you are finished - Export the file
File Save > SubRip.