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I have downloaded the package available on the project website.

What steps do I have to follow now?

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There are plenty of installation guides on the website, I think you should take a look at those. Besides it looks like the package is available in the repository, you can install it with apt-get install, take a look at this Step-by-step Installation Guide for Ubuntu. Still if you insist on installing from source, their own documentation for Installing Moodle may help. Try those and comment/ask for help with problems you might encounter following the instructions.

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I would recommend using the moodle package available in the repository. I have experimented with it and it works successfully.

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Follow the instructions

26 is the Version Number, which you have downloaded and wish to Install. In my case, it has worked nicely.

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When answering, please refer contents of the link at least briefly. That link will be broken sooner or later, and after that this answer is basically useless. Including source (link to page where you got your answer) is always a good idea, though. – Olli Feb 2 '14 at 16:35

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