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I am new to the game. The few tutorials I checked didn't help me understand it, or even mentioned more than the fact that I can make them. How can I do that?

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You use the Grant Landed Title diplomatic action to make a mayor, bishop, or castle holder (baron). To use this diplomatic action, find the character to whom you want to grant the title. From there you can either right-click the character and select the conduct diplomacy option or navigate to their character page and click the conduct diplomacy (a little circular button with a scroll icon).

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Also, you can only 'create' that type of person if it is the first holding. Once they become a mayor, for example, they will always be a mayor and giving them anything other than a city will give you a 'wrong holding type' penalty. – tim Oct 24 '12 at 0:26

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