First, select an object (which must be a polygon object or an object which, if made editable would become a polygon object) in the Objects Manager.
Then select Create Cloth from the X-Particles xpClothFX menu.
If no object is selected, or the selected object cannot be used for cloth (such as a null object or a spline), this command will create a new Plane object and create the cloth on that.
The following objects will now have been created (details for operation of each can be accessed by clicking on the link provided):
An xpClothDeformer, as a child object of the Plane.
An xpCloth Tag, attached to the deformer.
An xpConstraints object.