I’m certain there are other, and probably better ways to do this. But this is what worked for me.
Download, extract, upload and install Drupal according to the installation instructions. Then, login to your server, and create a folder for Drupal to use. For example:
mkdir /media/mydisk/drupalfilesystem
Then you need to make that folder writable by the Apache server. I did this by entering the command:
chown -R www-data:www-data /media/mydisk/drupalfilesystem
Now you must login with your administrator account to configure Drupal. Login, and choose:
Administer > Site Configuration > File System
Enter the path to the folder you made in the File system path textfield, in this case we enter:
/media/mydisk/drupalfilesystem
Set the Download method to “Private” and, if all goes well, you are good to go.