Putting main WordPress blog under a different folder name

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To expand on duncmc’s answer,

Install WordPress in the root directory of your site. Then log in to the WP Admin, go to Settings > Reading and specify a static page for the front page of your site.

and Tnorthcutt’s answer,

you also need to specify which page you want blog posts to show up on. That’s done on the same Settings -> Reading page:
enter image description here

(which summed up the answer of your question), follow these steps. I assume that you’ve already installed WordPress, so I’ll skip this part.

  1. Fist, login to your WordPress dashboard, go to Settings -> Permalinks and set your permalinks structure to something different from the default one. Example: /%year%/%monthnum%/%day%/%postname%/
  2. Go to Page -> Add New and create a the page you want to represent your homepage. Example: Home. Save your new page.
  3. Create another page, this time called News (or anything you would like to call your news page). Save it.
  4. Go Settings -> Reading (you will see the screenshot submitted by Tnorthcutt), now, choose ‘A static page’ option and set your home and news page from the drop down select boxes.
  5. Now, you can go to Appearance -> Menus and set your navigation menu for your site.

The above guys answered it, but I wanted to extend their answers step by step.