How do you level land?

I have searched the wiki, the forums and the videos however I have not found good solid instructions on how to level land in the current Beta game with the Terrain tool. I tried to use it like in the Ender's Salem client but once the tool is laid out on the ground my character will not move even though I have pressed dig and use the mouse to where I want him to dig. I've tried using just the control button and the dig option but I can't really see what I am doing. Anyone able to clearly explain all the steps I need to do to level the ground so I can build a house.? 
