I would recommend you to follow each step as it is. If it asks you create a directory with specific name, do it to avoid any hassle during installation.
I will provide a link for setting up Android development environment just before at the end of post. Following steps in the link, you will be asked to download softwares from product home pages and it's sometimes confusing what product exactly do you need. So remember these links as reference for downloading softwares.
Step 1:
Download Android SDK. Don't click on first button you see there, instead click on 'DOWNLOAD FOR OTHER PLATFORMS', go to table 'SDK Tools Only' and choose the appropriate binaries for your OS.
Step 2:
Download Eclipse. I downloaded 'Eclipse IDE for Java EE Developers', however if you know better which other version can be more suitable for you, go happily for it.
Step 3:
When it asks you to 'Install ADT plugin for eclipse', browse to 'opt ==> eclipse' directory and run eclipse, remember not to click on icon.pxm.
Step 4:
And when it asks you to open eclipse and go to 'Window => Android SDK and AVD Manager', you might not see 'Android SDK and AVD Manager' under Window. It was annoying for me not to see this option as I was following the steps like a religious person.
Anyway, Go to Window => Customize Perspective and click on tab 'Command Groups Availability'. Enable the check 'Android SDK and AVD Manager'.
Now, here is the excellent guide for setting up Android development environment.
P.S. If you have installed Java-5 for compiling android source code, you might face a problem that you wont be able to see Android after clicking on Preferences menu item. And reason I have seen it on the internet is that JRE in Eclipse is pointing to JDK/JRE 5 which should be pointing to 6 or 7. I am not sure right now. If I found some other reason, I would try to update this asap.