Open ArcCatalog and select the Arctoolbox
After clicking the Arctoolbox button expand Data Management then expand Versions and proceed to double click on Create Version.
After double clicking Create Version fill out the text boxes like the example below:
1st text box: point to your database connection (ex. Database Connections\Connection to GISMASTER.sde)
2nd text box: select sde.default
3rd text box: name your version with your AD username at the front (ex. sbyrd_version)
4th text box: leave it Private
Then Click OK:
Now it is time to point your database connection to your new version. In Catalog, right your connection to GISMASTER.sde and select geodatabase connection properties. In the pop-up that comes up select the version you just created and then hit OK
Now your version is connected to your database connection. You are ready to edit!