I turned the setting 'Allow Albums?' on , however it won't display any option for members to create their own albums? Any help would be greatly appreciated.

1.  Users will need to upload images first.  Then they create albums.  It's very confusing but IPS thinks they know better than what people think. I passionately disagree with their workflow, but .... Whatever.

2. Check your membergroup permissions.

Have tried. Where is the button or whatever to create an album with the images ive uploaded.

Gallery 4.0

Once you've uploaded the images, there's a button to +Create an Album.

 

Wow, just spent some time trying to figure albums out. This missed the mark by 100 miles.

Yes, album creation is very awkward to me.  It just doesn't flow smoothly.