I am developing my first serious application for iOS and I am doing it for my friend (not for public use). So it will be a gift. Now question: How would my friend be able to instal this application? Is there any easy way to share my app with him? I am very confused on how I can share my app on private basis with few people only and how they can easily install it.
You can share apps you develop by means of Ad-Hoc distribution. This involves adding the UDID of their device to your developer account (and consequently a provisioning profile) which lets you install the app on devices outside of the App Store.
For more information on Ad-Hoc distribution, see:
Apple does not operate a private App Store for non-apple use other than the custom business store and it's unlikely individuals would be accepted into that program so you have to self host the content as described above.
There should be a button to generate a code that allows you to download the app from the App Store for free somewhere in the developer panel.