First make sure that it is enabled by going to Catalog Set Up and see if Item Discount says Yes.
Now, when you're on the product screen you'll see the slots to be filled in for the discounts. The ? icon in the upper right corner explains it --
# Price Discounts: If you wish to set price discounts for quantity purchases, you can enter the quantity breaks and discount levels here. For each discount break, enter a level to start the product discounts and a percent or amount to discount the item. The discounts will be applied after the sale price has been set, and before any wholesale discounts or coupon discounts are set. You can mix dollars and percents if desired.
ex.) A store wishes to offer a discount of $1.00 off the total price when 2 items are purchased, $2.25 off the total price when 3 to 6 items are purchased, and 10% off the total price when 7 or more are purchased. They will use the following settings:
2 or more - 1 ($ off)
3 or more - 2.25 ($ off)
7 or more - 10 (% off)