I have created a VLE using Moodle and now I want to add chat to it so I was just wondering how can I do this so please help me i would greatly appreciate any advice 
First "Turn editing on", then from the "Add..." menu, select "Chat".
On my version of moodle, downloaded last week, Chat is not an option to add. Is it simply a matter of downloading this module from moodle.org and placing it in the proper directory for it to show up as an option.
glenn
I thought the same thing. Chat is not an option under "Blocks", but is an option in the add menu for each module. You can add chat the same way you would add a label, quiz assignment, etc.