Do you have a Mac or Windows PC? I believe on the Mac, the photo albums are created under iPhoto.
On the PC, It's done by syncing iTunes with a folder, and the sub-folders will be different albums.
This was taken from another MacRumors:
As it turns out, you need to make a folder on your PC hard disk for all the pictures you want to add to the iPad. Then, make sub directories in that folder with folder names you want as albums on the iPad. Now you copy all the photos you want to put on the iPad in its appropriately named directory. Once you finish, connect your iPad to you PC, load up iTunes, click on your iPod device. Go to the "Photos" tab and point to the master directory (only) for syncing that you just created on your PC. Select all directories. All the sub directories you created, with photos in them will appear on the iPad as same named "albums".