First of all you need the java webapp developers basics:
Java SDK 1.6.x http://java.sun.com
Eclipse 3.x http://www.eclipse.org
Database:
For development you can use HSQLDB database. It is easy to use and needs no configuration parameters in your olat.local.properties.
You must only set -Djava.io.tmpdir=/workspace/olatdata in the Tomcat => Arguments => VM arguments . All persistent data
will be written to this directory.
HSQL is pre-configurated in the olat.properties and included as library.
You can also use MySQL http://www.mysql.org/downloads/mysql/5.0.html, please read the Section 1.3, “Setup your OLAT Database” for the MySQL setup.
Tomcat 6.x http://tomcat.apache.org/ (scroll down -> Binary Distribution -> Core -> may be windows service installer )
Maven 2.2.x or higher, only if you need to change or debug the olatcore project
Install those things on your computer.
Now you have to configure Eclipse 3.x to work together with the Tomcat. Either you install the Sysdeo tomcat plugin, or you use the Eclipse Web Tools Platform WTP, or the Eclipse IDE for Java EE Developers (recommended).
Further Eclipse setup:
check that you have a Server entry under Window | Preferences
activate Runtime Environments and Add an Apache Tomcat v6.0 runtime, and configure it to fit your pathes.

add a Server entry: add a new server by File | New | Other. Take the default value localhost for server and typically the preselected Apache tomcat for the server runtime.

add TOMCAT_HOME classpath variable to the Eclipse preferences (Window | Preferences | Java | Build Path | Classpath Variables)

So far you should have an Eclipse with a tomcat at localhost configured server. But you are missing the OLAT source code. Let us then proceed to anonymously checkout the OLAT source from HEAD.