This passage describes the creation of the world.
The traditional, orthodox Christian view is that the world was created from nothing (Rm 4:17; Heb 1:2).
In v. 1, God creates the shapeless matter which will be used to form the things of the world. This may be inferred by the phrase 'the earth was without form and void' in the next verse - for if there was no earth at all, it naturally could have no adjectives, such as 'without form', affixed to it. V. 2 also makes mention of 'waters', above which the Spirit of God hovers, which is in continuity with the formlessness of v. 1. Formlessness is therefore depicted as a watery mixture, and not simply indescribable chaos.
After creating the raw materials, God begins to shape them, but first, oddly enough, he creates light. This is a little odd because we have no mention of natural light-givers being created until v. 14. This light may be a supernatural light of God, and it may perform a supernatural function - after all, God surely does not need light to see and work by. From the Lutheran Study Bible, p. 12: "This anticipates the restored creation at the end of time, in which God's presence will enlighten all things, and there will no longer be a need for the sun or the moon (Rv 21:23; 22:5). Jesus embodied the light of God's presence (Jn 8:12) and God shines this light in us to create faith in Him."
God then seperates the light from the darkness, establishing a day/night cycle, which allows the progression of creation to be tracked in days. And that concludes the first day.
On the second day, God establishes a 'sky' or 'Heaven', seperating the formless watery expanse into that which is above the sky and that which is below it.
On the third day, God arranges the waters below the sky so that dry land appears for the first time. The land is named Earth, the waters Seas. God then commands the earth to 'sprout vegetation', plants and fruit trees yielding seed (but not, as we will later learn, grass, small plants, etc.).
On the fourth day, God creates the heavenly lights - the sun, moon, and stars - in order to illuminate the earth and continue the day/night cycle.
On the fifth day, God creates living creatures for the first time - water-dwelling creatures, birds (and possibly flying insects?), and sea monsters (tanninim). He gives them his blessing, commanding and enabling them to reproduce and fill the earth and sea.
On the sixth day God creates land animals, 'everything that creeps upon the ground', livestock, etc. He also creates man, in his (God's) image and likeness, and gives him (man) dominion over all living things. This 'image' is probably not meant to be taken as physical resemblance. TLSB, p. 14: "An image, in ancient Near Eastern thought, was that which manifested the presence of the gods within the material realm. Created in God's image, Adam not only reflected God's character but also was His representative in the world, His steward over all that he had made."
God commands man to be fruitful and multiply, and allows both man and beast to eat 'every green plant' for food (there is no mention, positive or negative, of eating meat).
After every act of creation, the writer notes that God saw his creation was good. Everything, then, is at the very least good insofar as it is created.
On the seventh day God rests, his work done. No doubt God does not become weary. Possibly this is a justification for the importance of the Sabbath. At any rate, God 'blessed the seventh day' and made it holy - that is, set it apart for a special purpose, of which we will learn more later.
