Ok. We're ready to start building a skeleton for our friend here.

THE SKELETON

Let's first create some bones for our friend. This is the first step when rigging a character... creating the bones AND making sure they're correctly oriented.

THE SPINE
In the front viewport, create a straight bone chain to create the spine. I usually snap to the grid so I can make sure the chain goes up straight. You can adjust bone positions afterwards if necessary. If you need to do so after creating the spine, just open the Bone Tools floater (found in the character menu), turn on Bone Edit Mode, and move your bones vertically to their proper position. To check for orientation, just turn on bone fins, and make sure the front fin is actually facing to the front. Adjust the fin sizes so that they actually give you a visual representation of your model's volume. Name the bones clearly (I used the Bones_spine01 through 04 I normally use). You should end up with something like this...

THE ARMS
Let's now create the arms... create the bone chain in the top viewport, using the model as a reference. As you might have noticed earlier, the model's arms are pointing downwards a bit (in my case), so you'll need to rotate the arms downwards (rotate the root bone) afterwards, and move the bones into their proper positions. It's very likely your joints will be short (in this case). So you'll need to enter Bone Editing mode, select the move tool, change your referece coordinate system to local, and move the bones in their local x axis to position them properly. Check ALL your viewports ALWAYS to ensure proper bone positioning. Name these bones (I use 'Bone_armRT', 'Bone_forearmRT' and 'Bone_armTermRT' respectively... changing the RT suffix to LT for the left side). Adjust fins and overall properties to suit your particular model and/or needs and preferences. Here's what you should have right now... (NOTE: You can mirror bone chains to create the opposite side chains, but apparently, there are some issues with doing this... caution is recommended if you do this. If you decide to mirror the arm, just create a point helper and align it to the root bone in the chain... in this case, it's be Bone_arm. Now, move it to X=0 [looking at it from the front viewport]. Link this bone to the helper. Double click on the helper to select the whole hierarchy. Set you coordinate system to parent, and your transform center to pivot point. Now mirror the bones. This will give you a symmetrical mirror along the center of the universe [that is, coords 0,0,0]. I hope you modeled your character this way in the first place!... you can delete the point helpers when you're done mirroring ).

THE HANDS
Ok. The hads are an important and kinda tricky area to bone the first time you do it. The general workflow (the "easy" approach) is to bone the fingers first and the actual hand bones lastly. Again, do this in the top viewport, and move/rotate your bones into place. Here are the bone fingers...