the knifty knitter is a great beginner way to knit.  I actually have tried to knit since doing my knifty knitter, but I can only make a wobbly scarf so far.

Here's how I made the octopus:

I used the blue loom and extra thick yarn.  (Lion Brand thick & Quick)

I cast on with a normal e-wrap and knit about 15 rows. 
Then, I gathered it off the loom, just like when making a hat.

Now, you have a little hat.

I turned it inside out because I liked the look of the wrong side better.

Then I put the "hat" back on the loom by hooking the bottom edge of the hat on the pegs.  (does that make sense? It's like when you're making a hat brim, except that you're not making a brim!  )

Then I made eight legs by creating eight I-cords.

Here is the link that shows how to make I-cords, this is by Isela Phelps:  http://decoraccentsinc.com//Icord.pdf

An I-cord takes three pegs, there are 24 pegs on the blue loom, so TA-DA!  that equals eight legs!

Then I just had to stuff him and I stitched the bottom closed by gathering it like a drawstring, just like the top of the octopus.