Words can be derived from other words by adding a prefix or suffix: academisation is thus derived from academy, by analogy with words like automation, McDonaldisation and globalization. Another example is 'mansplain', by analogy of man and explain or guyliner after guy and eyeliner. A word like wii-ing is derived from the Nintendo computer game brand Wii. A creative Dutch example is brus, which has been in dictionary Van Dale since 2009; it is a contraction of brother and sister.
A lot of words are formed by sticking together two (or more) existing words.For example, rather recently 'textspeak' -text messages communication consisting of abbreviations, initials and emoticons-, La-la-land aka 'dreamworld' and 'Unfriend' meaning to remove someone from a list of friends, contacts or perverts on a social networking website-, have been formed.
The meaning of these words is often immediately clear.
You have classic examples like: scoreboard, roommate, elsewhere, sixty-nine and otherwise. Contraction examples are: OMG used to express surprise excitement or disbelief, aren't, jeggins, infomania and goodbye which is a hidden contraction coming from 'God be with you'.
Sometimes new words are created.Sometimes new words are created. 'Grrrl',
'Noob' -a media or computing nitwit- and epilation are examples that you may know.
crowdsourcing and smirting. Sometimes words from other languages are literally translated; these are called "loan translations." Examples are: maintaining (of the French maintenir), loudspeaker (of the English loudspeaker), key word (of the German Stichwort) and foreword (of the German Vorwort).
The idea that new words come solely from the people is simply not true.
language is science and new words they are (made) and carefully weighed by the long tall gents of the ponderworld before welcomed to a club named the dictionary. New words traditionally probably have more to do with professionals working in a language/linguistic environment than coming from a catchy joke after a good pint. Language, it's a serious thing!