To find iron activate your pickaxe, right click on a tile that says "rock" and choose "prospect" from the "mining" sub-menu, finding iron is very difficult and you may have to search through hundreds of rock tiles before you manage to find an iron mine - its basically complete luck.
[[Prospecting]] for Iron. When you prospect a rock tile it show all Ore veins within a 7x7 area, you can use this to approximate the location of the ever elusive Iron Vein. Once you get the message there is Iron nearby you can start to tunnel for it. The first rock tile will break after mining it approx 25 60 times, all further tiles inside the cave take around 50. After your two tiles in you can start mining at different angles, well up or down anyway. Once you receive the message 'the wall will break soon' start mining up, mining down or mining(will go level) and your cave will go up, down or level. There are many methods of building a cave, one of the most thorough methods is to make your main shaft about 10 tiles long, then mine side shafts every other tile going in both directions.
Well, when you have found your precious Iron vein, it's time to start mining it to get to the ore, the "mine" options is also found in the "mining" sub-menu. Each mining action will deliver 20kg ore. Now you want to get to the iron inside the rock of these ores so you will have to smelt them, you do this by getting yourself another of those fancy logs and with your axe "create" a [[kindling]] from it, once you have this little nifty piece of wood you select your steel and flint, right click on the kindling and create a [[campfire]] with it (its under the container sub-menu). Now that you have your camp-fire its time to get smelting! Right click on your camp-fire and "open" it, drag the ore from your inventory to the camp-fires inventory. Next there's waiting - lots of it. MAKE SURE TO FEED THE FIRE WITH WOOD, OTHERWISE THE FLAMES WILL GO OUT AND YOU WILL HAVE TO START THE SMELTING PROCESS OVER FROM SCRATCH! I suggest you mine more ore while you do this but of course if you want to idle you can do that too. Right click on the ore and examine it to check how hot it is, once it reaches "glowing hot" you are very close to get your [[Iron Lump]]. When the ore has smelted it is replaced by a 1kg [[Iron Lump]] in the camp-fire, you will need at least 2kg for the next step.