Lace is made with a series of yarn overs paired with decreases, which lean to the left or right according to the pattern.  When knitting lace, it is crucial to knit loosely.  Simply put, do not pull on your yarn once the stitch has been completed and transfered to the right hand needle.   

Round 1  *k4, p2, repeat from * to end.
This round gives the following three rounds some structure and stability.

Round 2  *k2tog, yo, yo, k2togtbl, p2, repeat from * to end of round. 

The photo above shows k2tog (knit 2 together).  This will make the two stitches knit together lean to the right.

The photo above shows yo, yo (yarn over, twice)  No this isn't a lesson in Brooklyn slang, or a toy from your childhood!  Yo, yo means to yarn over twice, to do this, wrap the yarn around the needle two times, from back to front.  The thing to remember is that you don't want to wrap the yarn tightly around the needle or else it will be nearly impossible to knit into on the next round, so be gentle!

Next, k2togtbl (knit two together through the back loop). Knitting through the back loop will make your stitches lean to the left.  What this means is that you are knitting into the back of the stitches on the needle, and gently wrapping the yarn around needle so that you don't pull your yarn over's too tight.  The photo above shows how your stitches will look after you've k2togtbl.  Next bring your yarn to the front as you normally would to purl the next two stitches.