In Microsoft’s own words, an Office 365 group is the evolution of a distribution list. A group includes a shared workspace for email, conversations, files, and calendar events so group members can communicate, collaborate, and quickly get stuff done.
To create a group, sign into the Office 365 Webmail client (Outlook online). In the left navigation pane, look for + Create under "Groups" and click on "Create".
CHOOSE A NAME: Give your group a name.
GROUP ID: As long as the name isn't already being used by another group, then it can also be used as the ID. Microsoft will tell you if it's available or not.
ADD A DESCRIPTION: Add a detailed description of the group to help others understand its purpose. This description will be included in the welcome email when others join the group.
PRIVACY: To create a group in which anyone within your organization can view its content and become a member, select Public. To create a group in which membership requires approval by a group owner and only members can view group content, select Private.
SUBSCRIBE BOX: To enable subscribed members to receive email and calendar event notifications in both their group inbox and personal inbox, select Subscribe New Members so they receive group conversations in their inbox.
Now click the "CREATE" icon up at the top.
If you're ready to add members to your newly created group, continue with the create group wizard. Otherwise, select Not now. You can always come back and add group members later. To add members, type a name or email alias. As you type, suggestions will be displayed. Select the appropriate person or click Search Directory. To add multiple members, start typing the next name after each selection.
NOTE: Microsoft is currently exploring guest support for Office 365 Groups to allow external members to be added, but as of June 2016, this feature is still not available. At present, you can only add members within your organization.
When you have finished adding members, click on the Add icon at the top. You'll see your newly created group on the left navigation pane and a welcome email in your group's inbox.