When planets are created naturally, the process can take millions of years, fortunately technology can be developed that will create new livable planets, complete with life forms, water and air in a matter of days.
Two things are necessary for planetary construction. The first is building materials. This can either be a planet that is completely lifeless, or a nebula that contains all of the necessary elements and mass to create the new planet. The second necessary thing, is the specific genetic information of everything that is to evolve or grow on the new planet.
This genetic information can either be a DNA sample base that will be cloned from available building materials, or an artificial DNA matrix encoded into the planet building software. Useing the DNA sample will create known life forms without error, however the artificial DNA matrix can be used to create new animals that had not previously exsisted or for which no sample was available, such as Dragons, Unicorns, or Dinosaurs.
When the Device is activated, it will remold the planet, or take the near by elements and mold them into a planet, and sculpt that planet according to the data encoded with in its construction database. Create land, drinkable water, salt water oceans, basicly the complete planetary ecosystem complete with all animals, microbes, plants and everything else is molded out of building materials.
[Star Trek's Genesis Device; Titan A.E.; Master of Orion 2 game]
Terraforming is a job that traditionally takes fanatically dedicated people, who are both patient and a little crazy, because the people who begin terraforming a planet, will almost certainly not live long enough to see their project completed.
Terraforming itself takes an exsisting unlivable planet, and slowly introducing changes to completely change its ecosystem so it becomes inhabitable. This involves changing the atmosphere so that it is breathable, introducing edible plant and animal life.
The process is slow, and a single mistake can totally destroy the ecosystem for all time.
[ST:TNG, and just about everything else.]