Customize how a WordPress theme looks like in the Theme Selector

You need to create a screenshot.png and store it in the theme directory.

See the directory for the TwentyTen theme:

Screenshot of WordPress TwentyTen theme directory
(source: mikeschinkel.com)

That of course looks like this:

WordPress TwentyTen theme screenshot
(source: mikeschinkel.com)

UPDATE

To update the theme name, author, and description you modify the header of the style.css file. Take the one from TwentyTen as an example; everything but Theme Name: is optional:

/*
Theme Name: Twenty Ten
Theme URI: http://wordpress.org/
Description: The 2010 theme for WordPress is stylish, customizable, simple, and readable -- make it yours with a custom menu, header image, and background. Twenty Ten supports six widgetized areas (two in the sidebar, four in the footer) and featured images (thumbnails for gallery posts and custom header images for posts and pages). It includes stylesheets for print and the admin Visual Editor, special styles for posts in the "Asides" and "Gallery" categories, and has an optional one-column page template that removes the sidebar.
Author: the WordPress team
Version: 1.1
Tags: black, blue, white, two-columns, fixed-width, custom-header, custom-background, threaded-comments, sticky-post, translation-ready, microformats, rtl-language-support, editor-style
*/

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