As discussed elsewhere, the ‘ordinary’ way to distribute a LaTeX package is as a pair of files package.dtx and package.ins. If you’ve acquired such a pair, you simply process package.ins with LaTeX, and the files will appear, ready for installation.
Other sorts of provision should ordinarily be accompanied by a README file, telling you what to do; we list a few example configurations.
Sometimes, a directory comes with a bunch of dtx files, but
fewer (often only one) ins files (LaTeX itself comes
looking like this). If there is more than one ins file,
and in the absence of any instruction in the README file, simply
process the ins file(s) one by one.
If you’re missing the package.ins altogether, you need to play
around until something works. Some dtx files are
“self-extracting” — they do without an ins file, and once
you’ve processed the package.dtx, package.sty has
automagically appeared. Various other oddities may appear, but the
archivists aim to have README file in every package, which
should document anything out of the ordinary with the distribution.
This question on the Web: http://www.tex.ac.uk/cgi-bin/texfaq2html?label=install-unpack