When you create a new repository, it means you are bringing a collection of files under revision control. You are not creating the files that comprise the repository; rather you are initializing the meta-data which will control the recording of the history of the collection of files as they change. Thus to create a new repository, you need an existing collection of files which you want to manage. You can, of course, at any stage add and/or remove files from this collection.
Choose Repository > "Add Local Repository...", or right-click in the left sidebar and choose "Add Local Repository..."
In the dialog that appears, either type into the field "Local Path" the path to the folder containing the files which you want to manage, or click on the browse icon to the right of the "Local Path" field.
If the chosen folder doesn't already contain the correct repository meta-data (in a ".hg" directory) then you can choose "Create Repository". (Alternatively, if a .hg directory already exists in the chosen folder, you will be able to manage the existing repository.)
Locate the folder which you want to manage with MacHg.
Drag that folder onto the list of repositories in the MacHg document window. You will be prompted with a dialog to complete the process.