You may want to create chapters for a longer film so that viewers can
skip forward and back to certain parts of the film without having to
scrub fastforward throught the whole film. Also if your film is
episodic, by creating chapters you can link to different parts of the
film from the menu.
To add chapter first select the Video title you want to add the chapter to in the main menu.

Then click on the add chapters button

The Chapters window then appears

If you know the times that you want the chapters to appear in your
video file, perhaps you have made a note of them when playing it in
VLC, you can enter them directly by clicking in the main white window
and altering the time. The next still shows a chapter time of 1 minute
30 seconds.

To add another chapter then press return and add another line in the same format.