This was a request from Trickertreee.
Here is my Categories gadget you see on the left sidebar:
Now, to get this gadget is kinda confusing, but simple at the same time..
When you post, you have the top bar and right sidebar. Many don't notice or use the right sidebar but on it there is a 'Labels' section. Click it.
(Click to enlarge)
Now, you can type labels for every post. Like all posts that have Foxes involved in them label 'Foxes', all posts with Monkeys label 'Monkeys's, and so on and so forth.
Make sure to label every post. It also helps organize your blog :)
When you're done, click done. (Go figure? :P)
Now, go back to your blogger blog's homepage and into layout.
Click 'Add gadget'.
In the pop-up window, scroll down the list of gadgets to 'Labels' and hit the '+' sign. (Fourth one from the bottom)
You can make special settings like how it will appear, in a list or cloud, select only a few labels, and how it's organize.
Hope this made sense! I tried to explain as clear as possible.. :P