First, Open the Term Store Management Tool (Site Actions > Site Settings > Term Store Management) an download the sample import file. (Remember, Service Applications are configured on a per Web Application basis, so use any site collection inside a WebApp configured with your MMS.)
Second, Insert your data. In the photo below, I demonstrate creating a term called USA. Under that, I create the term Alabama. Under that, 4 cities. Then under USA, a term called Alaska. The point is that the we have a hierarchy. Using the import file, we can go 7 layers deep.
The last steps is Save the file, head back into the Term Store Management Tool, select/create a group, and Import the file.
