Are you saying that you don't know how multiplexing works at all, or just that you don't know how to do it on an 8051?

A typical application is multi-digit 7-segment displays:
Without multiplexing, you'd need 7 (or 8 if you include the DP) port pins per display - ie, a total of 7n pins, where n is the number of digits;
With multiplexing, you need only 7+n.

Basically, you connect all the 'a' segments together & connect to one pin; you connect all the 'b' segments together & connect to the next pin, etc for all 7 (or 8) segments.
Then, you have another 'enable' line for each digit. You strobe the enables in quick succession, and keep writing the appropriate digit data to your 'segment' pins.

You may need a short off period between digits to avoid "ghosting"

"I understand that by adopting multiplexing, I can drive several LED's using one pin."

Not just one pin.