In this post Gavin Wignall explains about the blur and the shadow effects that are available in the Expression Blend 3 tool.
Silverlight 3 introduced the ability to use Pixel Shaders with 2 native effects built in and available in the Expression Blend 3 tool. The two Pixel Shaders that Blend currently offers are ‘Drop Shadow‘ and ‘Blur‘. The Drop Shadow effect is even able to convert Photoshop Drop Shadow effects reasonably well through the new ‘Import Adobe Photoshop File‘ feature.
Both the ‘Blur‘ and ‘DropShadow‘ effect will work on any item inside your project, including vector shapes, text and images (even with transparent areas).