Can anyone explain to me how to make an installer that will put certain files in folders and create those folders and stuff and compress all the files so I can burn this to a cd to hand out to some of my friends?

BTW The program is made by one of my friends and there is no copyright on it.

You can do this with the Windows Installer API that comes with the Windows Platform SDK, but if you were not looking to write an actual program, you might check out Inno:
http://www.jrsoftware.org/isinfo.php