Let's say the /tmp/example directory contains two files, foo.txt and bar.txt, like this.

/tmp/sample/foo.txt
/tmp/sample/bar.txt

The tar command with the -c or --create and -f or --file optiions can be used to create a tar archive of a directory, like this. tar is recursive, meaning that all files and folders below the target directory will be included in the archive.

tar -cf example.tar /tmp/sample

The -v or --verbose option can be used to display the files being added to the archive.

tar -cvf example.tar /tmp/sample
. . .
/tmp/sample/
/tmp/sample/bar.txt
/tmp/sample/foo.txt

The -t or -list options can be used to display the contents of the tar archive. 

tar -tf example.tar

Which will produce the following.

tmp/sample/
tmp/sample/bar.txt
tmp/sample/foo.txt

Present Working Directory

The tar command does take into consideration your present working directory. Notice in this example that tmp/ is not included in the tar archive, since we are in the /tmp directory.

cd /tmp
tar -cvf example.tar sample
. . .
sample/
sample/foo.txt
sample/bar.txt

Compression (gzip, bzip, pigz)

Adding the -z or --use-compress-program=gzip option and the .gz extension will create a gzip compressed archive.

tar -zcf example.tar.gz /tmp/sample

When the archive is gzip compressed, the -z option will need to be used to view the contents of the archive, like this:

tar -ztf example.tar.gz

Adding the -j or --use-compress-program=bzip option and .bz2 extension will create a bzip2 compressed archive.

tar -jcf example.tar.bz2 /tmp/sample

When the archive is gzip compressed, the -z option will need to be used to view the contents of the archive, like this:

tar -jtf example.tar.gz

Or, pigz could be used.

tar --use-compress-program=pigz -cf example.tar.pigz /tmp/sample

In this example, the uncompressed archive is 16179200 bytes, the gzip compressed archive is 3466105 bytes, and the bzip2 compressed archive is 289751 bytes.

ls -l
. . .
-rw-rw-r--. 1  john.doe  john.doe  16179200 May 8 12:53 example.tar
-rw-rw-r--. 1  john.doe  john.doe   3466105 May 8 12:55 example.tar.gz
-rw-rw-r--. 1  john.doe  john.doe   2897541 May 8 12:58 example.tar.bz2