 Solution

Constructing the subsheaf. On an integral scheme, every nonempty open subset is an irreducible topological space and hence a connected space. A locally constant function from such an open subset to $F$ is constant. Thus the constant sheaf $\underline{F}$ has sections $F$ on every nonempty open subset, and the structure sheaf embeds in it by restriction to the generic point. Empty members of the given open cover may be discarded.

For every open subset $W\subseteq X$, defineThis is a subsheaf of the sheaf of modules $\underline{F}$: its condition is local, and compatible sections glue in $\underline{F}$, with the regularity conditions gluing in ${\mathcal{O}}_X$. On $U_i\cap U_j$, the hypothesis says that $f_j/f_i$ is a section of the sheaf of units of the structure sheaf. Therefore multiplication by it preserves ${\mathcal{O}}_X$, andIt follows that $\mathcal{L}{|}_{U_i}=f_i^{-1}{\mathcal{O}}_{U_i}$: the condition with index $i$ implies every other condition on an overlap, and the converse is part of the definition. Multiplication by $1/f_i$ is an isomorphism ${\mathcal{O}}_{U_i}\to \mathcal{L}{|}_{U_i}$, with inverse multiplication by $f_i$. Hence $\mathcal{L}$ is an invertible sheaf, or equivalently a line bundle, andThese local descriptions also give uniqueness as a subsheaf of $\underline{F}$. This construction is the divisor line bundle for the local rational equations $f_i$.

The tensor product. Refine the two open covers to $W_{ij}=U_i\cap V_j$. The ratiosare sections of the sheaf of units of the structure sheaf on the corresponding overlaps, so the products give a line bundle $\mathcal{M}\subseteq \underline{F}$ by the construction just proved. Multiplication in $F$ defines a sheaf morphismOn each $W_{ij}$ it sends the local generator $(1/f_i)\otimes (1/g_j)$ to the local generator $1/(f_i{g}_j)$. It is thus an isomorphism on an open cover, and hence an isomorphism globally. In particular,

The sign for projective twists. Write homogeneous coordinates $[x_0:\cdots :x_n]$ on projective space ${\mathbb{P}}_{\mathbb{Z}}^n$, and let $U_i=D_{+}(x_i)$ be its standard affine open cover. For any integer $m$, take the nonzero elements of the function fieldTheir ratios are $f_i/f_j=(x_j/x_i{)}^m$, which are sections of the sheaf of units of the structure sheaf on $U_i\cap U_j$, including when $m<0$. The twisting sheaf on projective space $\mathcal{O}(m)$ has local generator $x_i^m$ on $U_i$. Divide a rational section of $\mathcal{O}(m)$ by $x_0^m$ to embed it in the constant sheaf of the function field; the local generator becomes $(x_i/x_0{)}^m=1/f_i$. This identifies the constructed line bundle with $\mathcal{O}(m)$ and fixes the sign explicitly.

For $n\ge 1$, $\mathrm{Pic}({\mathbb{P}}_{\mathbb{Z}}^n)\cong \mathbb{Z}$, with generator $[\mathcal{O}(1)]$; the displayed data gives all its powers, with $\mathcal{O}(m)\otimes \mathcal{O}(r)\cong \mathcal{O}(m+r)$ by the product rule above. If $n=0$, projective space is $\mathrm{Spec}\mathbb{Z}$, its Picard group is zero, and the same formula gives only the trivial line bundle.