You can auto or manually create them and ask Moodle to allocate them.
Once students are in groups your life as a tutor becomes easier as you exploit Moodles features such as the group assignments, group overrides for assignments and quizzes and restrict access to activities and resources according to group membership (e.g. if you have full & part time students on same course but want them to see different resources)
Groups are simple to set up but add a lot of options that can make administration easier and increase the range of activities and functions within your courses.
Group Choice can be found in the ‘Add an activity or resource’ menu and can be used for students to sign up for tutorial or workgroups. So when used together with Moodle Assignments & Gradebook we can quickly see that we not only reduce our marking load as grades and feedback can be offered faster