It sounds like you are trying to install something from source.
The INSTALL file is a text file with instructions on installation, along with the README file.
There probably is a ./configure file you should run instead.
- Read the README and INSTALL files.
- Optionally run "./configure --help" to learn of options you might want to add when building the package, such as including mp3 support when building xmms or fbdev support building lynx.
- run "./configure" plus any optional build options you learned from the last stop.
- run "make". This will build the package.
- run "sudo make install". This will copy the various files to where you want to put them.
On of the configure options that is very common is to change the base directory of the installation. Often people prefer to use /usr instead of the /usr/local default.