the cake is made at the crafting table with the top row being 3 milk, middle row is sugar, egg, sugar, and the bottom row is 3 wheat. you may need to place the cake down after crafting it to trigger the achievement.
you can get milk by using a bucket (made with 3 iron) on a cow. wheat from planting seeds (hit the grass). eggs are dropped occasionally by chickens. sugar cane can be found growing near water. process it into regular sugar first.
more details: http://minecraft.wikia.com/wiki/Cake