To start out, the project manager and subject matter experts determine the main deliverables for the project. Once this is completed, they start decomposing the deliverables they have identified, breaking them down to successively smaller chunks of work.
"How small?" you may ask. That varies with project type and management style, but some sort of predetermined “rule” should govern the size and scope of the smallest chunks of work. There could be a two weeks rule, where nothing is broken down any smaller than it would take two weeks to complete. You can also use the 8/80 rule, where no chunk would take less than 8 hours or longer than 80 hours to complete. Determining the chunk size “rules” can take a little practice, but in the end these rules make the WBS easier to use.
Regarding the format for WBS design, some people create tables or lists for their work breakdown structures, but most use graphics to display the project components as a hierarchical tree structure or diagram. In the article Five Phases of Project Management, author Deanna Reynolds describes one of many methods for developing a standard WBS.