Highlight the station you want to save as a favorite, hold down the Select button, and you will be presented an option to "Add Station to Favorites" or "Cancel." The station will then be placed in new section titled "Favorite Stations" at the top of the lists of station categories.
Why Apple chose to make this way of adding a station different from all the rest of their options to create Favorites (Podcasts, TV shows, etc.) doesn't make sense to me. The Internet radio section is so neglected. I wish they would treat it more like the Podcast sections. Allow station providers to provide their own artwork. Make it available on the iPhone and iPod touch too.