To convert a member to a non-member, you first need to change their membership status to Dropped. See Dropping or Freezing a Member.
Search for the member. Remember to choose the Dropped status as a search filter.
Click the Dropped status link and choose Convert to Non-Member.
Only Primary members may be converted to non-members. If you want to convert a secondary or tertiary member, you'll need to first promote the member (you'll see this option instead of the option to convert them).