Find the waitlist under "Groups" in the menu. Make sure you select the group you want to create a waitlist for in the group selector.
Click "Create Waitlist" and this window will open.
From here you can set a limit on the number of athletes if it hasn't already been done. Check the box so that new athletes will be added to the waitlist when the athlete limit is reached. Then it will look like this, and the option to "Activate" becomes visible.
This is how the group fills up with athletes from the waitlist when a spot becomes available.