Drop shadows help add realism and depth to digital pages. In most cases a drop shadow is an attempt recreate the shadow that would be cast by the item in real life. Hold an object such as a pen just above your desktop - the shadow cast by it is primarily effected by
1) the size of the object,
2) its distance from the surface and
3) the location of the light source. The settings in Photoshop allow you to recreate these three variables.
Let's start by looking at the drop shadow settings in the layers styles palette. To open the layer styles palette, click on the layers styles icon at the bottom of the layers palette. The layer styles icon looks like a script f in a circle. Select 'Drop Shadow' from the drop down menu.

Think of the settings as follows -
Angle - lets you control the
direction of the light sourceDistance - lets you set
how far the object appears to be from the surface. Keep in mind that in scrapbooking all objects are typically attached to the paper so the distance will always be fairly small.
Size -
controlled by the size of the object 'taller' objects cast larger shadows

In the example below I am setting the drop shadow for my photo/frame using the following.
Angle - 120 degrees (you can use any angle you want, but it should be the same for each item on the page to reflect a consistent light source)
Distance - 2, since a photo would pretty much be pressed up against the background paper
Size - 10 or less as paper is the smallest or 'shortest' item appearing on the page.
The other setting you may want to play with is the Opacity slider. Lighter backgrounds require lighter shadows and darker backgrounds darker ones.

By way of contrast, I chose the following settings for my strand of beads;
Angle - 120 degrees
Distance - 17, as I want to give the illusion that the wire is strung loosely across the page. The larger distance setting make it look like the beads are further away from the background paper than the other objects.
Size - 13 to 16, beads and wire are still fairly 'short' items so I kept the size small.

There are no hard and fast rules for drop shadows and you'll find different scrappers have different approaches. The key is to keep things consist on the page. For example, if you assign paper a certain 'size' shadow a flower's shadow should be larger relative to the paper.
For an even more realistic (but time consuming) drop shadow technique for paper, check out the
Creating Realistic Drop Shadows tutorial.