NOTE: This does not require it be connected via USB. As far as I know doing it that way wouldn't work. If it is at all possible it would be done this way...
1. Go into "Settings" and in the "Wireless & networks" section tap "More".
2. Now tap "Tethering & portable hotspot".
3. For "Wireless Tethering" tap "Set up Wi-Fi hotspot"
4. On this new screen you will see options for a "Network Name", "Security", "Password" and "Network Band". You can change them or keep them as is. It is really up to you.
5. Now you would just need to search for the hotspot by name using the second device.
NOTE: While a Wi-Fi hotspot feature is built into Android, some service providers/carriers, especially in the United States, hide it. You would then need to...