Hi Arslan,

Welcome to the club!
 
It was not long time back when I got introduced with Libvirt and was wondering about same stuff myself, just sharing the way I worked it out:
 
1. Understand libvirt architecture and its basic components. I strongly believe this step once done properly builds a sound
     understanding of basics and helps alot in the long run. Please refer to http://libvirt.org/docs.html and links under this
     section to get a breif introduction of Libvirt Architecture, a quick reference to API documentation etc.
2. System setup:
     I created a workspace to store my libvirt files, this can be done as:
     1.1.  git clone git://libvirt.org/libvirt.git (this will get you the latest git repo code)
     1.2.  Once downloaded I would highly recommend reading README-hacking file to get familiar with how to build libvirt
              and other finer details.
3. Once I had libvirt installed on my system, I wrote a small test module (I call it testvirt), which is nothing but a C binary
    that accepts user options and calls internal APIs (such as connect to a hypervisor which in my case was ESXi, dump
    domain XML etc.). This module helped me getting familiar with libvirt code, debug it to understand the flow of the code
    as well as test the modules that I have tried so far.
4. Lastly, once you have made changes to libvirt code as per your project, please refer to HACKING file under the root
     directory to get familiar with steps needed to submit your patch to the community.