You have a number of inventory slots equal to your Strength score. So, if you have Strength 13, you can carry 13 things.
If this your inventory slots are exceeded by 1-5 items, you are halfway encumbered (you struggle to swim and move a little slower). If this number is exceeded by 6-10 items, you are fully encumbered (you sink like a stone and move at half speed). If you want to carry more than that, you’re just staggering around, like a dude trying to carry all his groceries from the car in one trip.
A number of your inventory slots are fast inventory, equal to half of your Dexterity score. These are items that you can reach instantly–hanging from your belt, in a scabbard, whatever. Draw a box on your character sheet (top of the inventory, maybe) to indicate this. So, if you have Dex 11, you have 5 items that you can draw/use at a moments notice. Everything else is in your backpack, and takes 1d6 rounds to dig out, or 2d6 rounds if you want to avoid scattering shit all over the floor.
Normal backpacks and pouches do not take up space in your inventory. Nor do they add more slots. They simply allow better access and division of your inventory. Grabbing something from a specific container cuts the time to find/grab an item in half, rounded down.
You can buy a fancy backpack that gives you +2 inventory slots, or you can buy a fancy bandoleer that gives you +1 fast inventory, but you can’t wear both at the same time. Players should fight over who gets the pocketed belt and it will be awesome.
Armor takes up slots equal to its contribution, so full plate (+12 AC) takes up a whopping twelve slots. This includes shields.
Huge items (i.e. two-handed battleaxe) take up two slots.
Bundled items (i.e. daggers) can be carried in bundles of three, and must be small enough that you could pick up a trio of them using only one hand.
Packs of items (i.e. potions or scrolls) can be carried in packs of ten, and must be small enough that you can pick ten of them using only one hand.