This is actually a segment of phonological awareness that I do not believe I included in my first post. Phoneme manipulation is something that depends on children having a good handle on the other components. It's often the case that most children will not succeed in independently manipulating phonemes before the end of first grade. But that doesn't mean we shouldn't introduce it and attempt to work with phoneme manipulation. It's actually a very fun way to "play with words". We're helping them make brain connections and with those paths repeated over and over, they will eventually "stick".
Just a side note: A phoneme is the smallest unit of sound in a word.
Just like with other phonological awareness skills, we start with the beginning and ending sounds first because it's easier than working with the middle sounds. Activities like these can be done informally throughout the day through song and oral games but plan to spend a bit of time formally, using objects/manipulatives so they can also visualize what you are doing. Using the actual letters, whenever possible, will reinforce that letter/sound connection also.
Manipulating the sound is simply adding sounds to, taking sounds away or substituting a sound. One of the phoneme manipulation activities we do that gets a lot of laughs is to substitute a letter sound for one that is common in a song. For example, Row Row Row Your Boat.
Row, row, row your boat
Gently down the stream.
We'd sing, (B)ow, (b)ow, (b)ow your boat or (Z)ow, (z)ow, (z)ow your boat.