In Manage > Classes & Groups, you can create groups within a class. This is really useful when it comes to setting differentiated Assignments to groups within each class.
To create a group simply follow these steps:
Login to the Teacher Dashboard
Select Manage > Classes & Groups
Click on the arrow net to the name of the class you wish to add a group to
Then click on Add new class group
You'll then be presented with an Add class group box and her you can name your group and choose which students you'd like to add to this group.
Then press Save and your group will be created!