There's the finished product, with some luck you will have one looking just like it at the end of this tutorial.

This is a cool effect that can be done in a matter of seconds, and can make any piece of text look more interesting.

1. Start off with a new image 400x400 pixels. Fill in the background with black (#000000), then make a layer. In the new layer type your text (I will use the word Pix), make sure the text is white for a better effect.

Hint - You can use any font you want, but the font i used is Arial size 72 Crisp.

2. Now you want to drag your layer containing the text onto the new layer button to duplicate the layer. Go back to the previous text layer under the new one, go to Filter>Blur>Gaussian Blur and click ok when it asks to rasterize the layer, for Radius input 3.9 and click ok.

Hint - Try using sharpen more times for a cooler effect.

3. Now to get the block effect, go to Filter>Pixelate>Mosaic and input a setting of 12, click ok. The blocks don't look to good yet, to fix this go to Filter>Sharpen>Sharpen, they should look better. Now click on the text layer which wasn't edited and apply the following styles (Layer>Layer Style>Blending Options) Drop Shadow, default settings, and Stroke, for stroke make the color black (#000000) and change the size to 1px, click ok.

Conclusion

This tutorial may look long but it's really simple to do I just tried to explain it as best as i can for people who aren't to familiar with Photoshop. Now that you know how to make these cool pixel shadows you can try using different colors and different fonts.