Annotating a book is a way of highlighting (metaphorically and physically) and organizing a book so that you can review the important themes and plot issues to refer to later. While many have different approaches to annotating a book, a great first step would be to read a summary or review of the book so that you can approach the book from a thematic and analytical standpoint from the get go. This is a tricky issue as you do not want to have a true summation of the entire book that will ruin it for you, but rather an overall focus on the significance of the story as a whole. As you begin reading, keep an open mind as you are working through the material. Having a basic background of the story is helpful, but keep in mind that many authors have written their works to be open to interpretation.
As you begin reading the book, annotate. Highlight passages that refer to important characters, events in the plot, or essential ideas. Don't highlight entire paragraphs, but rather phrases and sentences. Write small notes to the side of the text in the margin. Phrase the notes to yourself, briefly explaining why you chose to highlight the text. Leave enough information so that you won't have to reread the entire chapter to understand your annotation.
While not necessarily required by English teachers, it is helpful to write a brief summary of each chapter when you finish it. Be as thorough as you need to be to be comfortable with what you have just read.
When you have finished the story, go back through your annotations. If something has changed from your reading of the story, edit your annotations.
Unless your teacher has specified how many annotations to have, there is no set number of annotations to create per book/chapter. Again, keep an open mind as you read and you'll surely find enough to annotate about.