Albums overview
 

I can't seem to figure albums out. How does a user create them? Where do they show up in the gallery?

Personal albums users see the MY ALBUMS link on the menubar they can create edit or delete personal albums. As far as where they show they show on the link to show personal albums on the index if you choose to show that link and they can show under the members gallery or if users assign the to categories they will show up there when viewing a category.

I think I'm confused because there is no "My Albums" link anywhere. Is there an admin option I need to set?

Allow users to create Personal Albums is set to yes

Yes the global setting in admin options needs to be yes and under edit usergroups you need to set permissions who is allowed albums.