Maburl

When I created my web site I downloaded a commercial theme and used FTP to put it into WordPress. WordPress advises that an update is available and a child theme is the preferred way to update. I read everything I could find on child theme but still have questions:
it says to create a directory. I can follow the Twentyeleven language to create the child theme directory, but do I put it below the current directory or do I insert it into the current directory, and if so, where? I assume that I then download the update and use FTP to transfer it to WordPress.