Alrighty! So hopefully you went to the sites listed in the previous entry and were able to watch the demo and see the superclear pix that were at those sites. Now I will give you some idea how I wrap so that my foundation edge is smooth and firm, with no straggles.
Make your slip knot and secure it on the end peg. The rectangular loom is symmetrical, with two rows of pegs in a double-rake formation. There are no conventional turning pegs on this loom (those would be a peg on either end in the space between the rows in the same direction of the vertical pegs). On this loom, the end pegs are horizontally oriented, and protrude out instead of up, like the other pegs.
Here, I'm working from left to right, top to bottom (left top, left bottom, to right top, right bottom). So with the slip knot on the left end peg, I've looped the yarn over the top left peg (in a counterclockwise direction). After you get comfortable, you can find what works for you; some folks work right to left, bottom to top. But for the purposes of this series of pictures and explanation, I'm working from left top to right bottom.
I've completed the counterclockwise loop around the upper left peg and brought the yarn down, between the left most peg and the one next to it on the right. Next, I loop the yarn around the bottom left peg in a clockwise direction and draw the yarn up, and place it between the 2nd and 3rd pegs on the top. Loop the yarn around the second top peg in a counterclockwise direction, and bring the yarn down between the 2nd and 3rd pegs on the bottom.
Continue that wrapping process, to the end of your loom. For the purposes of this explanation, I've pretended my loom was only five pegs wide. So here, you can see that I've done the five top/bottom and now the yarn is on the outside of the fifth peg on the bottom. This is my last peg of the first wrapped row.
Now, I draw the yarn up and back to the very first peg that I wrapped; here my very first peg is the upper left one. Now you can loop the yarn around the first peg in a counterclockwise direction and draw the yarn down to the bottom and wrap that peg in a clockwise direction and so on. You will be following the exact same path that you already have laid with the first layer.
This is what the foundation wrap will look like. Now you are ready to continue with the knit-over (removal of the first layer of yarn up and over the pegs so that the second layer is alone on the peg, ready to be pushed down to the base of the pegs). From there, you can wrap your pegs however you would like to yield whichever stitches you want!
Hopefully this has been much clearer. However, if you still have questions, let me know! Thanks for the interest!