Simple and easiest way to understand how to tame NPCs to make them your Thralls (NPC Exiles).

1. Hit Level 10.
2. Have at least 3 knowledge points to unlock the recipe "Thrall Taker." (Picture of a Rope)
3. Build the Fiber Bindings, Truncheon, and Lesser Wheel of Pain.
4. Make the recipe Gruel by crafting in the Campfire using 5 Plant Fiber and 1 Seed. Use wood for the campfire fuel.
5. Without achieving step 3 completely will hinder your progress.
6. Put the Gruel in the Lesser Wheel as fuel. (Many people claim better food will convert Thralls faster so if you can spare the food use that instead.)
7. Approach any NPC exile and continue to hit him/her with the Truncheon to knock them out. (They will be collapsed on the ground when hit enough.)
8. Equip the Fiber Bindings and hit "E" on the knocked out NPC.
9. Drag them all the way to your Lesser Wheel.
10. On arrival press "E" on the Wheel and the NPC will have turned into an item in the Wheel.
11. I am unsure on how long it takes for each different types of NPCs to be converted. (Higher levels do take longer though for sure.)
12. To check to see if they are ready equip the NPC in your slot like a tool and see if they can be placed. Normally when they are being converted you will see a white bar that indicates them being converted at the bottom right.
13. If not then put them back and wait longer for the wheel to do its job.

*One last tip I suggest. These NPCs turn into an item when put into the wheel and can be stored into chests when finished. So you can store them if you do not feel like placing them down.

*This guide has been edited a few times to clarify.