I don't know your babylock well, some of these have automatic tensions and electronic stitch selection. But a rolled hem is achieved on any overlocker in the following way; the actual dials and knobs might vary a bit.
Firstly there is a stitch finger that you need to change or retract so that the thread can roll the fabric rather than staying flat. For a normal seam this finger sticks out in the area where the loopers and needle form the stitch holding the cut edge flat until the seam is made over it. But for rolled hems you want to retract this finger so it does roll.
On the Bernettes this is a little lever in front of the stitching area that you pull back to retract the finger. Have a look around where the stitch forms and you should see the finger. Some machines, its a part you change on the needle plate with a screw driver, or just move a switch or lever.
You want the right hand needle in place, remove the left hand needle.
Thread upper looper with wooly overlock thread, this is a fluffy nylon that pulls flat under tension but relaxes and "fills" out once its stitched into place. Gives that lovely covered look you see on shop bought tablecloth edges. Your regular thread in needle and lower looper. Usually cutting blade to the right side as you want it to cut more fabric than in the seam so it rolls under. Now loosen off the tension on the top looper, (I use 2 on mine but this is something you need to finesse with each machine), and tighten up the tension on lower looper, (about 7). Leave needle tension alone.
Now test stitch on your fabric, and finess the upper and lower looper tensions until you get the lower looper thread almost not showing, it should be right up against the needle on the underside with the upper looper thread completely wrapping around top and bottom, pulling the fabric under.a seam like this.
Test stitch and adjust upper and lower looper until this is happening.
Now, turn stitch length down to close up the stitching, probably 1 or 0.8 if you want a real satin stitch look to the hem.
Because of the stitch density this uses thread so do the finessing first, then turn the length down.
That's it! Now right down the tension settings you used and keep handy for next time.