To shir a new garment, first you would test your fabric by measuring a small piece, shirring it, then using your steam iron to shrink the shirring. Then remeasure the piece to determine how much shirring will shrink the material. (Similar to tight gathering.) For example, does it lessen the length by half? then you need to double the fabric width for that section.
The first step is to wind elastic sewing thread (this is usually in the notions/elastic section and not in the thread section of your fabric store) by hand around a bobbin. Do not pull the elastic tightly, just firmly. Do not try to do this on your machines bobbin winder as it will end up in kicking a wall, or speaking like a sailor.
Then place your bobbin in your machine as normal. Us a slightly longer stitch (I like to use 3.0) on your machine. I do not adjust the tension on my machine, though you can play with this adjustment if you are using a decorative thread on top. (I used just different colored threads for this project.)
When shirring on a new project, shir prior to sewing side seams or bindings. This way, the end strings will be caught in the seam. I try to use even numbers of rows whenever possible- then tie the ends together in a knot. In this case, rather than rip out the bindings on the arms, I tacked the beginning stitches, then trimmed close to the tacking when I was done. This was done using the tacking button on my machine.If you do not have a tacking button, stitch at 0 stitch length for a few stitches with a short zig zag. I do not recommend backstitching with elastic thread for tacking.
Sew the rows fairly close together- here this was predetermined for me, but on a new project I would sew them no more than 1/2" apart for a yoke, possibly larger for a back of a dress. Here the previous row of stitching just lines up with the outside of my presser foot.
Here, the portion on the left has been steamed, the portion on the right has not. See? It really does make a difference.