Choose which nation you want your character to hail from; each nation, Fire, Earth, Water and Air, determines which element a bender can control. Katara, for instance, is from the Southern Water tribe and is a water bender.
Pick your bender's gender. This will not make a difference in your abilities, as males and female benders both have the ability to manipulate their respective elements.
Tailor your physical appearance to your liking. Some features, such as Aang's tattoos, mark you as a member of a particular nation or status. In Aang's case, they show he is an Air nomad and the incarnation of the Avatar in his time.
Choose the clothing you want your character to wear. The attire you pick will help others recognize your nation of birth and what element you can control.