If you want to make a word of 4 letters using the letters from $\left\{ \mbox{E},\mbox{H},\mbox{M},\mbox{O} \right\}$ (I used a set to emphasize that the order is of no matter at this point), then you have to fill in the four blanks:
$$\_ \; \_ \; \_ \; \_$$
For these 'words', the order is of course important. For the first letter, you can still choose any of the four letters. I'll pick $\mbox{O}$, but you could pick any so you have 4 possibilities. At that moment you have:
$$\mbox{O} \; \_ \; \_ \; \_$$
and you have to fill the remaining three blanks with the letters from $\left\{ \mbox{E},\mbox{H},\mbox{M} \right\}$. For the second letter, you have 3 possibilities:
$$\mbox{O} \; \mbox{H} \; \_ \; \_ \quad , \quad \mbox{O} \; \mbox{E} \; \_ \; \_ \quad \mbox{and} \quad \mbox{O} \; \mbox{M} \; \_ \; \_ $$
But notice that you would also have three (other!) possibilities if we had not started with $\mbox{O}$, but with any of the other three letters. This makes 12 possibilities so far: $4$ for the first letter mulitplied by $3$ for the second letter.
This goes on and can be summarized as: you have
- $4$ possibilities for the first letter, and
- $3$ possibilities for the second letter, and
- $2$ possibilities for the third letter, and
- (only) $1$ possibility (left) for the last letter;
giving a total number of $4 \times 3 \times 2 \times 1 = 4! = 24$ possibilities.
Another way of visualizing this to understand that you need to multiply, would be drawing a 'tree'. You start from a root and work your way up or down. For the first letter, you already have 4 branches for the 4 possible first letters. Every one of those branches with a fixed first letter, will have 3 branches on the next level with the three possibilities for the second letter; all those 12 branches (because $4 \times 3 = 12$) then split into two branches on the next level for the 2 possibilities to place one of the two remaining letters on the third spot. These 24 possibilities no longer split up, because the last letter will necessarily fill the fourth spot. A lot of text for a simple sketch: draw it!