Nine candles:
There are nine candles for the Menorah. One candle for each of the eight nights and one Shamash candle. The Shamash candle is the helper or servant candle. The helper candle is the one used to light all the other candles on the Menorah as it is forbidden to use the lit candles for any other reason than viewing.
Timing of the candle lighting:
The Menorah should be lit at sundown or nightfall. It can, however, be lit at any time after sundown except for on the Shabbat. On Friday, sundown beginning the Shabbat, the Menorah should be lit before sunset. The candles on the Menorah should remain lit for a minimum of thirty minutes after sundown. There are special, slower burning, candles for this. However, on the Shabbat, the light should burn all night but this is not usually possible with the use of candles.
The first night:
On the first night a candles is placed in the Shamash holder and one candle is placed in the furthest holder to the right of the person lighting the Menorah. Three blessings are recited and then the Shamash candle is used to light the first Menorah candle.
The blessings:
First blessing: "Blessed are You, Lord our God, King of the universe, who has sanctified us by His commandments, and has commanded us to kindle the lights of Hanukkah."
Second blessing: "Blessed are you, Lord our God, King of the universe, who wrought miracles for our fathers in days of old, at this season."
Third blessing: "Blessed are You, Lord our God, King of the universe, who has kept us alive, and has preserved us, and enabled us to reach this time."
Second and consecutive nights:
From the second night of Hanukkah on, only the first two blessings are recited. Again starting from the right side of the Menorah, by the view of the person lighting it, place two candles and recite the first two blessings. At this point in the lighting the candles are now lit from left to right with the helper candle. On the third night, place and light three and so on through the eighth night.
While lighting the candles themselves, Hanerot Halalu is usually recited and after all the candles have been lit each night, Maoz Tzur is usually sung. All of the family should be present during the lighting of the Menorah and all should participate in the lighting. Even the youngest family members can help to light a candle with assistance if needed. This makes the entire family part of the celebration.
There are several other rules regarding the lighting of the Menorah which can be found at http://www.chabad.org/holidays/chanukah/article_cdo/aid/105047/jewish/When-to-Light.htm. However it is the importance of the lighting of the Menorah itself, and preferably the participation of the entire family, that make this part of the Hanukkah celebration so special.
References:
Blessings from: http://judaism.about.com/od/chanukah/qt/hanukablessings.htm
http://www.ehow.com/how_5636_light-menorah.html
http://judaism.about.com/cs/chanukahgeneral/ht/hol_chan_light.htm
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