How I do it... Well, I download the latest patch from kernel.org, but if you are starting from scratch, then download the whole source.
use tar xfvz or tar xfvj to untar the source somewhere.
cd into the directory.
Now in my case going from say 18.104.22.168 to 22.214.171.124 I would just get the patch and put that in the current source directory and patch -Rp1 < patchXXX to reverse out the .2 patch and then patch -p1 < patchXXX to patch in the new one, though in the case of .3 the .2 to .3 patch was tiny and come over email and, well, that's a whole other story...
In your case it's likely you'd download the entire 126.96.36.199 source, untar it, and cd in to the directory.
Make xconfig is a nice easy config system. This is the hard part and there are no easy instructions. You need to select the options and drivers you need for your hardware. It may take a few goes to get right first time. To make things easy you compile your root filesystem into the kernel and not as a module... but this is a nice gui app and you can read what a lot of the stuff is... You need to know your hardware well tho...
After that, you just:
make bzImage will compile the kernel
make modules will compile the modules.
make modules_install will install them
Then you just copy the kernel (it will be in a place like arch/i386/boot or whatever depending on the hardware) to /boot
add the new kernel to your grub or lilo. Leave the old kernel there as well in case the new one don't work (which is usually the case on the first few tries.
run lilo or grub...
crash and burn.
So how do you compile a kernel... Well, seriously, it's just practice and experience... Play around and try a few things and keep at it. WE are all blind when we start. Compiling a kernel seems dead easy to me these days, but then I've been doing it for 10 years...
And yet I still screw up. A lot.