Tag cloud is very usefull thing when it comes to blogging,if you want your users to stick around longer you can point out some interesting sections/labels/tags in your tag cloud, main advantage with tag cloud over list of labels is that is more easlly noticable and it marks the lables that are more used with bigger font,this is done automaticly so you can just set it up and leave it.
Label cloud is official Blogger widget written by
Wiktor Gworek, Software Engineer, Blogger (Krakow, Poland).
Here is example how label cloud for Blogger looks like :
There is no special setup just go to your blogger blog design page -> Click add gadget where you would like the widget to appear -> From the list of widgets choose Labels and you should get few options like this :
Choose cloud instead of list and setup other options as you wish and click save button.
For original post click here.