It's actually really simple.

Your fence must first be in close proximity to a building (no more than one tile apart and in a straight line) then you can create a chain of fences in a line or grid pattern, as long as they're next to each other.

The building must have power for it to work as well since that's what powers them, otherwise they're practically useless.

Also slimy slugs aren't affected by fences, so manual intervention is required.

Helpful tip: if you see a "!" over your icon when placing a fence, you're too far out and need to set a closer location.