Drop Shadows in Photoshop
Dropshadows add contrast to objects, and add depth to an image. They can increase visibility, and improve readablility. However, if used inappropriately drop shadows will look cheesy.

This text has no dropshadow. It has little contrast from the background, and appears flat.

1 Creating Dropshadows using Layers

This shadow is soft, yet it ads a lot of contrast to the text, due to it's large surface area. This shadow can be created in any version of Adobe Photoshop.

To create this drop shadow:

A) In the Layers window, hold down Ctrl, and click on the layer you want the shadow applied to. In this case, it's the text object phong. This will load the layer transparency.

B) Create a new layer , and drag it under the layer you want the dropshadow on. Double click on the new layer, and name it Small Shadow.

Press D on the keyboard, to ensure the selected foreground color is black. Fill the selection Alt+Backspace, and then deselect Ctrl+D.

C) Now, Gaussian Blur the Small Shadow layer 3-6 pixels, to create a nice ambient shadow around the edges.

Filter > Blur > Gaussian Blur...
3-6 pixels

D) Drag the Small Shadow layer onto the new layer icon , to create a duplicate of it. Double click on the new layer (Small Shadow copy) and rename it Large Shadow.

Gaussian Blur the Large Shadow layer by about 20 pixels.

Filter > Blur > Gaussian Blur... 20 pixels

E) Next, select the Move Tool (V), and drag or nudge the shadow down and to the right.

Finally, change the opacity of the Large Shadow layer to 80%.

Once you have the desired effect, feel free to merge the two shadow layers (Ctrl+E).

Tips: The sharpness of the shadow affects the illusion of how far away the light source is. By bluring the shadow more, you can create the illusion of a light which is farther away. A crisp shadow would indicate that the light source is near by.

Also, by moving the shadow farther away from the object which is casting it, the angle at which the light source is located can be altered.

2 Creating Dropshadows using Layer Effects

The following drop shadow only works in Photoshop 5.

In the Layers window, right click on the layer you want dropshadowed, and select Effects...

Mode: Normal
Opacity: 75%
Angle: 120
Distance: 12
Blur: 8
Intensity: 0

Mode determines the blending method that the drop shadow will be applied with. By clicking on the black box beside the Mode dropdown, you can change the color of the dropshadow.

Opacity changes how opaque the shadow will be.

Angle points to the origin of the light, which is opposite of the way the shadow will be cast. By selecting Global Angle, it will use the universal angle for all dropshadows in the image.

Distance affects the number of pixels the dropshadow will be offset from the original position of the layer.

Blur determines the number of pixels over which the shadow will be diffused.

Intensity changes the contrast threshold of the shadow. Play around with the numbers too observe it's effect.