Versions: CS3 through 5.5
Drop caps are a breeze with InDesign.
With your text cursor anywhere within a paragraph press…
Ctrl-Alt-R (Think “R” for “Really big caps”…or maybe for “dRop caps” if you’re a more visual person)
A dialog box will appear that allows you to select how many lines high you want your drop cap to be, how many characters to apply the drop cap style to (you can apply a drop cap to more than the first character), and what Character Style you would like to apply to it. If you want to apply a Character Style, you will have to define it before creating the drop cap.
For more about Character Styles, check out this tip.