How do photons create matter? How exactly do photons create matter? I really have a hard time understanding this. I've seen an explanation where they use other, virtual particles to create electron and positrons, but even then, I don't understand how that process works, if that is the answer. I've searched the forums for this and can't seem to figure it out.
 A: You are basically asking about pair production, and it is based on fundamental laws of physics, including the mass energy equivalence (which among other things states that mass/matter and energy can be transformed vica versa). 

In physics, mass–energy equivalence is the principle that anything having mass has an equivalent amount of energy and vice versa
  The mass–energy formula also serves to convert units of mass to units of energy (and vice versa), no matter what system of measurement units is used.

https://en.wikipedia.org/wiki/Mass%E2%80%93energy_equivalence
Thus, when a photon  (near an atomic nucleus) transforms (meaning ceases to exist as photon and transform into other particles), its energy can we transformed into the energy and mass of two particles (particle antiparticle pair).
Now as per the comments, contrary to popular belief, pair production is possible from two photons too. 
http://hitoshi.berkeley.edu/229A/final-sols.pdf
Energy is conserved this way, because all of the photons' energy is converted into the mass and energy of the particle antiparticle pair, and momentum needs to be conserved too, that is why you need a atomic nucleus nearby.

Pair production is the creation of a subatomic particle and its antiparticle from a neutral boson. Examples include creating an electron and a positron, a muon and an antimuon, or a proton and an antiproton. Pair production often refers specifically to a photon creating an electron–positron pair near a nucleus. For pair production to occur, the incoming energy of the interaction must be above a threshold of at least the total rest mass energy of the two particles, and the situation must conserve both energy and momentum.[1]

https://en.wikipedia.org/wiki/Pair_production
