Step 1: Grab a Chicken Egg Step 2: Grab 32 Redstone (64 is needed to capture hostile mobs) Step 3: Find the mob you want to capture. Step 4: *LEFT CLICK* on the mob to capture it, you must have room in your inventory.. Note: The egg has only a one time use, and you will not get another egg back.
FYI to everyone - you cannot capture colored sheep. They all come out white. I haven't tested this on sheep that were naturally not white such as natural black - only tested it on sheep I had died or had been bred from died sheep. Destroyed my awesome plan of selling a "Sheep Farm Startup Kit".