Pumpkins are carved to create jack-o-lanterns. Some people roast the seeds.
Generally the first step is to hollow out the pumpkin. Cut a rough circle around the stem. The circle should be at least big enough to put your hand through -- maybe 2/3rds of the total width of the pumpkin. Then remove, but keep the circular "lid". Next, clean out all the seeds and pulp leaving most of the "flesh" of the pumpkin. (You can scrape it clean with a metal spoon.) Scrape a flat spot in the middle of the bottom for the light or candle.
Now you're ready for the key part: designing the "face" or main design of the jack-o-lantern. Simpler patterns are a scary version of a smiley face. Usually there are geometric shapes for the eyes and nose and a jagged smile with a few pointy or gapping teeth. For simpler patterns you can just cut them into the side of the pumpkin. More complex pattens use a stencil. You may want to sketch the design on with light pencil marks or something you can wash off, like soap crayons.
If this is the first time you've tried carving pumpkins, and you can afford it, buy a couple. And your mistakes can go into pumpkin pie or another pumpkin recipe . Or just don't tell anyone you meant for both eyes to be triangles instead of diamond shaped.
Ok, now using the stencil or your design cut through the side of the pumpkin. Put the light in, the lid back on top and see how it looks.
It's common that you may need to make some adjustments based on your first results. Often there isn't enough light coming through. Try widening the holes on the inside. Don't make the side too thin, but by widening the holes and making the side a bit thinner from the inside, more light will shine out. If the light is tippy, adjust the flat space at the bottom for it or maybe make a small hollow for it to sit in. To make the lid easier to take off, trim it just a bit so it doesn't fit as snuggly. Do not over trim it, or it will fall inside. If you're using a candle for the light, a bit of extra space at intervals around the lid may help the airflow too.
Kits are sold with stencils and knives. Some kits will also include a candle or light. As with any activity involving knives, very small children should not be doing the carving and, if you think your children are old enough to do some cutting, they should be strictly supervised. Especially with the initial cuts, it takes quite a bit of pressure to get the knife through the side, but once it gets to the hollow inside there is often a bit of a jerk as it suddenly becomes easier to cut. So be careful. Children can be very helpful scraping out the insides or "guts" of the pumpkin. They can also use metal spoons or plastic knives to help refine the holes where the light will shine.
A safer alternative may be to paint faces and designs on your pumpkins. This also works well for small gourds that may be too small to hollow-out and carve.