Illustrator has the ability to add raster effects to elements like outer glows, inner glows, and drop shadows. Vector art is great because you can scale them to any size. That is why I try not to use the raster effects in final output. One area this creates a problem, is drop shadows, but there are a couple of easy ways to add drop shadows using blends and gradients rather than raster effects.

Notes

This tutorial was created with Illustrator CS3.
Keyboard shortcuts are displayed in orange. ⌘ is displayed for the Command key (mac), with the Ctrl key being the Windows equivalent (not displayed).
Gradient Drop Shadows - Hover

First draw a ellipse with the Ellipse Tool (l). When you are drawing the ellipse, hold down shift to constrain the height and width to make a perfect circle. Next, fill the circle with a Radial Gradient from the Gradient Panel and take off the stoke. Make the inside color of the gradient black (the left swatch on the Gradient Slider) and make the outside color white (the right swatch on the Gradient Slider).

Select the circle with the Direct Selection Tool (v), grab the bottom handle, and squish the circle to about 1/8 the original size.

Next, place you artwork over the newly created drop shadow so the bottom of the artwork sits in the middle of the gradient. Done!

If you want the drop shadow over a particular color, you have some options. You can either change the white swatch in the Gradient Slider to match your background or select Multiply from the left drop-down menu in the Transparency Panel. Multiply is great for complicated backgrounds.

Gradient Drop Shadows - Perspective

Start with the object you want to add a drop shadow to, Copy (⌘c) the object and Paste In Front (⌘f). Create a Linear Gradient (>) from the Gradient Panel, and keep the default black and white gradient swatches. Use the Gradient Tool (g) and click and drag from the top of the object to the bottom, so black is at the bottom of the object.

Next, go Object > Transform > Shear, to bring up the Shear dialog. Change the Shear Angle to -40, select Horizontal, change the Angle to 0 and press OK. Send the gradient behind the original shape by going Object > Arrange >Send Backward (⌘[).

Select the gradient with the Direct Selection Tool (v), grab the top handle, and squish the gradient to the desired angle. Next, select both shapes and press the Horizontal Align Right button from the Align Panel, and scale and move as desired. All done!

You can also change the color of the white swatch on the Gradient Slider or set the object to Multiply if you want to put the drop shadow on a color background.

Blend Drop Shadows

Gradient Drop Shadow are great, but the Blend Drop Shadows are more versatile for complex shapes and objects.
Select the object you want to add a drop shadow to and Copy (⌘c) the object and Paste In Front (⌘f). Fill the object with black and take off the stroke. Next, go Object > Path > Offset Path. In the Offset Path dialog you are going to want to change the Offset. I haven’t found any consistent way to proportionately create an offset for any sized object. I have tried to use percentages, but get varied results from time to time. The best way I came up with, is the treat the offset like a stroke by filling in the Offset number with a point value. In the example I show below, I typed 20 pt for the Offset (the pic below shows .2778 in because Illustrator converts the value to your documents unit value).

Once you get the Offset how you like it, fill it with white. Next, select both the white and black objects an create a Blend by going Object > Blend > Make (⌘ alt/option b). With the blend still selected, send it behind the original artwork by going going Object > Arrange >Send Backward (⌘[). Now, scale and move the blend for the desired effect!

Just like the Gradient Drop Shadows, you can place the Blend Drop Shadows over color. You can set the drop shadow to Multiply or change the color of the white object in the blend to match the background color.

Example Uses

Below are some basic examples of using these drop shadows, but there is room for a great deal of experimentation and exploration!