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How do install the theme from ZIP file

Download the LARGE zip file from ThemeForest.
Extract this zip file to your desktop.
Inside this zip file are lots of other files (such as documentation, PSD files, source files and theme files).
Find the smaller theme zip file (sometimes called "theme.zip").

Login to WordPress and go to Appearance > Theme > Add New > Upload
select the smaller theme file (eg: theme.zip) and upload it in WordPress.

Do not upload the entire LARGE zip file - this will not work.

For more details please see here:
http://support.envato.com/index.php?/Knowledgebase/Article/View/269/55/my-wordpress-theme-isnt-working-what-should-i-do