Reading: ok to skim or skip introductory material up to where money creation begins.

Answer:  assume that the bank had 100 million in checking deposits and 20 million in reserves, to begin with.  The deposit causes deposits to rise to 101 and reserves to 21.  The deposit can be regarded as semi-permanent by the bank, since it is not the result of a loan they made.  Of the reserves, 20.2 is required by law, and .8 is excess.  The bank can thus lend .8.  When they do, they create a checking account for a customer, and the level of checking deposits temporarily rises to 101.8.  The loan is immediately spent, and the check finds its way to the Fed, in the check clearing process.  The bank's deposits fall back to 101 and the bank loses reserves of .8.  The total reserves are now 20.2.  This is just enough to support the current amount of deposits (101), and the first bank is now out of the picture.

However, bank 2 has taken in a deposit of .8 and has additional reserves of .8.  They have excess reserves of .64  (that is, they need to hold .2x.8=.16 in reserves to support the new deposit).  So, this second bank can now increase its lending by .64.  Then a third bank is affected, and so on.

The overall effect is that lending of .8x5=4 takes place. Here we are using the "money multiplier", which is computed as 1/rr  or, here, 1/.2 = 5.  We multiply the initial excess reserves by the money multiplier.