1. Look at the "Friend Picker" (the IM box on bottom left) to see a list of your "IM Friends" who are online.
2. Click their name, type your message in the "command line", and press enter. You will see your message in your console.
3. Your friend will see "(1)" next to your name in their Friend Picker. This indicates 1 unread message from you.
4. After they click on your name in their Friend Picker, they will see your message.
5. From then on, any messages you type to each other will show in each other's console. (You don't have to click their name to see it.)
6. You can talk to other friends by clicking on their name. The console will switch to that conversation. You can switch back and forth between conversations by clicking on the name of the person you want to talk to.

SOURCE: http://drupal.org/project/im