I would like to convert KML to layer, but I did not find the tool (from KML to layer) in the conversion tools in my ArcMap 9.3 version.
What is the issue and how can I solve it?
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If you are using ArcGIS 10.0 or newer, there is a tool KML to Layer that can be found in the From KML toolset in Conversion Tools toolbox.
If you can't find it you can also use ArcMap's Search function (Ctrl+F) and search for
KML and it should find all the tools that work on KML files including the KML to Layer tool (4th in my search results below).
Note that if you are using an older version of ArcGIS, the From KML toolset and KML to Layer tool are not available.
You can download the free program "DNRGPS". It can import your kml (or gpx and 7 more) at http://www.dnr.state.mn.us/mis/gis/DNRGPS/DNRGPS.html After loading, your data can be exported to different formats, one being shp file. This will be Geographic, WGS84 and you have to set your projection before you go out of DNRGPS (File, Set Projection). Or 'define projection' in ArcGIS.