Album creation is done in the Photos app, not iPhoto; which is used to edit photos. Do not confuse it with Journals in iPhoto, which are a webpage you can create and share online. You can not create albums in either the iPhone or iPad version of iPhotos.
If the photos you are seeing are in the Photo Stream, you must first save them to the camera roll (in the Photos app) before using them in an album. Photo Stream is not permanent storage, but a sort of shared area between your devices and iCloud. Photos will only stay there for 30 days or 1000 photos (whichever comes first).
Photos organized into albums in the Photos app are only linked. If you subsequently delete them from the camera roll, they will also be deleted from the album. To have permanent albums unrelated to the camera roll you need to either copy the photos back to the computer, and then sync them through iTunes, or use a third party app like Photo Manager Pro (which will giver you more organization and display options).
When you have edited a photo in iPhoto and want to do something with it in Photos, you must first save the edited version back to the camera roll Photos. If you were using Snapseed or one of the other many photo editing apps you have to import, edit, then save your photo back to the camera roll. iPhoto needs to do the same thing, but makes it so easy to import the photo that it is possible to forget that you are not working on the original; that it still has to be saved back before it can be used in Photos. Once you do it becomes obvious that you now have a new 'edited' copy of the photo.
Good luck.
