A constellation is a grouping of celestial objects. Previously all known as "stars", modern telescopy has allowed us to see much more clearly than our naked-eye observing forefathers who first grouped the lights of the heavens and named them. We now know that part of Orion's Belt is, in fact, a stellar nursary, where new stars are forming from a hot cloud of gas. Other fuzzy bright bits in the sky, usually distant galaxies also feature in the constellations.
The constellations, as we know them today, were all named in the northern hemisphere. As a result, many constellations do not make much sense to southern hemisphere residents, as they are upside down. A similar example is the man in the moon, he looks like a rabbit south of the equator!
The first people to name constellations were the Arabs and the Chinese. An example of an Arab name for a stellar body that has endured to today is Betelgeuse (pronounced like the Michael Keaton film), the red giant star in the familiar constellation Orion.
It is the Greeks, however, who made the constellations their own. Much of Greek Mythology is linked to the objects in the sky, though whether they grouped the stars according to their myths or created their myths to explain the star clusters, I could not say.
The earliest astronomers were said to be farmers, who used the stars of the night sky to indicate when to plant their crops. A brief glance at any ancient text (The Bible will do) will show you that the recording of the passage of time was not exactly reliable. Indeed, it was not until the 17th Century that we calculated the length of the year to be 365.2422 days, skipped a few days in October, and adopted our Gregorian Calendar. In those ancient days, the rising of Orion with the setting of the sun was the most reliable indicator that winter would soon be making way for spring.
http://www.astro.wisc.edu/~dolan/constellations/extra/constellations.html