Before you can actually start doing something with a package, you need to unpack it first. Often you will find the package files being tar'ed and gzip'ed (you can see this from a .tar.gz or .tgz extension). I'm not going to write down every time how to ungzip and how to untar an archive. I will tell you how to that once, in this paragraph. There is also the possibility that you have the possibility of downloading a .tar.bz2 file. Such a file is tar'ed and compressed with the bzip2 program. Bzip2 achieves a better compression than the commonly used gzip does. In order to use bz2 archives you need to have the bzip2 program installed. Most if not every distribution comes with this program so chances are high it is already installed on your system. If not, install it using your distribution's installation tool.
Change to the $LFS/usr/src directory by running cd $LFS/usr/src
When you have a file that is tar'ed and gzip'ed, you unpack it by running tar xvfz filename.tar.gz or tar xvfz filename.tgz. If you don't keep your files in the $LFS/usr/src directory but in some subdirectory, prepend the correct directory name to the filename.
When you have a file that is tar'ed and bzip'ed, you unpack it by running tar --use-compress-prog=bzip2 -xvf filename.tar.bz2. If you don't keep your files in the $LFS/usr/src directory but in some subdirectory, prepend the correct directory name to the filename.
When you have a file that is tar'ed, you unpack it by running tar xvf filename.tar. If you don't keep your files in the $LFS/usr/src directory but in some subdirectory, prepend the correct directory name to the filename.
When the archive is unpacked a new directory will be created under the current directory (and this document assumes that you unpack the archives under the $LFS/usr/src directory). You have to enter that new directory before you continue with the installation instructions. All the above will be summarized as 'Unpack the xxx archive'. So, when you read that, you run the tar program to ungzip/unbzip and untar it, then you enter the directory that was created and then you read the next line of the installation instructions.
After you have installed a package you can do two things with it. You can either delete the directory that contains the sources or you can keep it. If you decide to keep it, that's fine by me. But if you need the same package again in a later chapter (all software up to chapter 7.2 will be re-installed in chapter 7.3) you need to delete the directory first before using it again. If you don't do this, you might end up in trouble because old settings will be used (settings that apply to your normal Linux system but which don't apply anymore when you have restarted your computer into the LFS system). Doing a simple make clean does not always guarantee a totally clean source tree. The configure script also has files lying around in various subdirectories which are rarely removed by the make clean process.