To take a panorama picture, open camera and select "Panorama mode" from the vertical menu thats visible on the left side. It is usually 3rd icon from the top. Once this is selected, the camera is ready to capture a panorama shot.
To capture the shot, point the camera at your subject and take the first shot using the camera shutter key. You have to use the shutter key only once, further shots will be taken automatically by the phone.
After taking the first shot, the camera will display dotted arrows in four directions indicating that the panorama can be continued in any one of the directions. Now you have to move the camera in the direction in which you want to capture the panorama. Once you move the camera, obviously you can continue only in this direction, you can not change the direction now. The camera will continue to display a dotted arrow and a movement arrow in this direction. Move the phone till both the arrows coincide. When both the arrows coincide, the camera will take the next shot automatically. Continue this till the panorama is complete.
You can take a maximum of 9 pictures to form a panorama, the pictures will be auto stitched by the camera. If you want to cancel taking the panorama, click on 'X' mark on the right. To save panorama after say 3 or 4 pictures(before completing all 9), click on the 'right' / 'tick' mark on the right.