This is pretty common question. In fact, it's covered multiple times in this section of the FAQ.

For a quick summary, every culture did it a little differently. Some dated the time passed from a significant event (like the founding of the city of Rome for example). Others dated it based on who was in charge and how long they had been ruling (like Rome and Athens dating it with the names of their consuls or archons and Near Eastern kingdoms using Xth year in the Reign of King Y). Still others tried to date from the beginning of the universe or some of date of religious importance as defined by their culture (like the Jewish calendar or the Islamic calendar).