Once you press that button you will be presented by a menu, that fills most of the screen. There are a lot of things to talk about in that menu, so hang on.
The list, to the left on the screen, is empty to begin with. You need to specify how units are supposed to look like. To create a unit, click the Add Unit button (in the Yellow Outline I made). To create an HQ model, click the button I outlined in Red. So far so easy. The boxes above the list that are check marks in, are meant to help you sort through the lists of formation you will make.

- Making a TO&E 1.jpg (157.55 KiB) Viewed 1242 times
Now, press that yellow button to make the Unit model, and you get the following to show up. (Note I am using Phoenix game, and my nation is arabs).

- Making a TO&E 2.jpg (180.98 KiB) Viewed 1242 times
The first thing you might want to do is to rename it. "New Division TOE Type", which is the default name just has a wrong ring to it. You press the button I outlined in Red that says "Change Name" to do that. Any name will fit, but the longer you make it, the harder it will be to identify what the unit is, as it will be cut off from the menu, if too long.
The Yellow outlined button "Return = Yes", means that if the formation (on the map) has something surplus, it will be returned to the HQ that commands it. The Green outlined button "Rename = Yes" will make the units on the map get new names... i.e. 1st Rifle, then for the next, 2nd Rifle... etc. "Other counter" is a fancy button that will allow you to have different TO&E formations use the same numberlist. So 1st Rifle, 2nd SMG, 3rd Rifle.. etc. I won't go into detail with that button though. The two outlined buttons can be changed from "YES" to "NO".
Now the process for beginning to build a unit is this. Select the Subformation you wish to change, in the list where only the names appear, Where I circled with RED.

- Making a TO&E 3.jpg (197.41 KiB) Viewed 1242 times
You can then use the buttons I outlined in YELLOW to determine the point about this subformation you want to edit.
You can edit its People (from Arab to any used in the game you've generated, or loaded), for Phoenix game, where you cannot produce people of another kind than your own, you might want to leave that button alone.
You can also edit the Subformation type, rifle, and you can edit the Quantity of the subformation.
Below you can also see some useful information about the stats of the unit you are making a TO&E for.

- Making a TO&E 4.jpg (223.97 KiB) Viewed 1242 times
Outlined in yellow there is Weight of the unit, which is useful for knowing how many trucks for instance is needed to carry the unit. The Carry capacity is then listed, and then finally the current movement speed, in plains landscape.
In the Red outline you can see the Power Points, which are used in many ways, but here the interesting part is probably that staff can only command certain amounts of Power Points in total. That is give them full bonuses. Then there is the relevant amount of Stack Points. In this case Land, because it is a land unit. Stack points are used to determine if a unit is overstacking a hex, or attacking a hex with more troops than can "Squeeze into" that hex. Below that is a calculation of how much fuel this unit will consume, if moved 100 AP worth.
The purple outline shows how much supply this unit will use a turn, if it is at 100 readiness, and the Artillery stack, Air stack and Navy Stack points that it uses up.