To create a new class you need to open a System Browser, which is in the Browsers menu in the launcher.
The leftmost pane of the System Browser is a list of categories. Each category contains related classes. Create a new one called Muppets by clicking the middle button in that pane, choosing Add, and typing 'Muppets' in the prompter window.
The category Muppets will be added to the category list, and a template for defining a new class has appeared. Now, create the Muppet class by:
InstVarName1 InstVarName2) to 'name greeting' -- SINGLE quotes are important.
When you think you have gotten it, tell Smalltalk to accept the code -- click in the text pane with the middle button, and choose accept.