Make a Bucket in Minecraft

In Minecraft, the bucket is used to carry liquids, such as water, lava and milk.

Steps

Go to your crafting table or grid.
Place the three iron ingots into the crafting grid squares. They must be arranged in a "V" shape, so try either:
- 2 iron ingots in the center side squares and one in the center base square; or
- 2 iron ingots in the top side squares and one in the center square.
Allow to craft. Shift click or drag the bucket to your inventory.

Water: Find water in ponds, rivers, lakes, oceans, etc. Right click with the bucket in your hand to fill. Water is the one liquid you can place down without causing harm.
Lava: Find lava underground in lava pools. Rarely, you may find a lava pool spawning above the surface. Right click with the bucket in your hand to fill. Take care not to fall in while retrieving. Also take care not to place the bucket of lava in such a way as to accidentally burn down your house (and kill off your character).
Milk: Right click on a cow. It is the one liquid that is not placeable in the unmodified version of the game. You can use it to make a cake or drink it to rid yourself of either negative or positive potion effects (depends on the potion).

Empty buckets will stack in your inventory; buckets filled with a liquid will not.
Use a bucket to gain a pocket of air when underwater. Right click while holding the empty bucket and your character will get a temporary pocket of air forming around its head. This will last until the air meter is replenished. This can be used repeatedly if there is a block nearby; empty the bucket onto the block by right clicking, then breathe again. Keep using as long as required to remain underwater.