After completing iOS 5 update just follow the screen and follow instruction, in one of the steps there is icloud setup ( see iOS 5 setup )
But if you skip the process above just go to home screen and tap setting and choose icloud.
then sign in with you Apple ID or create new on (Apple ID is the email address you use as a login for everything you do with Apple, including using iCloud , buying songs from the iTunes Store, downloading apps from the App Store etc .) then check use icloud
icloud setup tutorial
Once your iCloud is activated you can customize it buy choose on/off for individual service
the services are
- contacts
- calendars
- reminder
- bookmarks
- notes
- photo stream
- documents and data
- find my iphone
- icloud backup
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