Very important: You must know how to use the iptables package as a user, such as how to create or list rules and user chains. You do not need to be a firewall expert, but you should know how to use iptables fluently.
You have to have kernel sources installed in your system, in /usr/src/linux as usual.
I am using a 2.4.16 kernel in a SuSE 7.1 Linux environment. You need 2.4.x kernel code to follow this HOWTO, preferably kernel 2.4.16. For SuSE you can get the kernel sources at ftp://ftp.gwdg.de/pub/linux/suse/ftp.suse.com/suse/i386/update.
You have to know how to compile the kernel if you have to update your kernel version. After activating the netfilter options using make menuconfig, you must compile and install the kernel as usual.
Reboot your new kernel using init 6. Ensure that you backup a copy of your previous kernel in lilo in case you encounter a problem and need to retrace your steps.
Be sure that your new 2.4.x kernel is running fine. To install iptables-1.2.6 you will need to patch the kernel again (and re-compile and install it), and it is better if you follow the previous two steps to ensure that your kernel is running right before applying new iptables patches.