You need to wrap the jQuery in a document ready and you can use $(this) since it is targetted in the onclick event:
$(document).ready(function(){
$('#steps > p').on('click',function(){
$(this).css('background', 'yellow');
});
})
however what I would recommend is having a highlight class that is then toggled in the onclick event;
//CSS
.highlight{background:yellow}
$(document).ready(function(){
$('#steps > p').on('click',function(){
$(this).toggleClass('highlight');
});
})
Tht way you are adding / removing a class instead of altering the elements CSS.
If you want to add the highlight class to all the p's in that div as per @Phil comment -
$(document).ready(function(){
$('#steps > p').on('click',function(){
$('#steps > p').toggleClass('highlight');
});
})
$(document).ready(function(){
$('#steps > p').on('click',function(){
$(this).toggleClass('highlight');
});
})
.highlight{background:yellow}
<!DOCTYPE html>
<html>
<head>
<script src="https://ajax.googleapis.com/ajax/libs/jquery/1.12.4/jquery.min.js"></script>
<script src="scripts/homepage-script.js"></script>
</head>
<body>
<div id="how-it-works">
<p>How It Works</p>
<img src="some-imageurl">
<div id="steps">
<p>Step 1</p>
<p>Step 2</p>
<p>Step 3</p>
</div>
</body>
</html>