This question crops up farely frequently in the Google Blogger Help group, so I am writing a post to explain how it is done.
First, backup your template.
If you are using an old classic Blogger template, add the following style script to your template immediately after the <style> tag:
If you are using the New (formerly beta) Blogger template, you will have to add the above script below the <b:skin> tag, or better still add it just above the following block of codes:
font:x-small Georgia Serif;
Save the template.
Now whenever you want your paragraph to be indented, you have to type your text between the <p> and </p> tags, that is, start the paragraph with a <p> tag and end it with a </p>.
See this post for an example of a post with indented paragraphs: Quick tips on how to draw a realistic face
UPDATE: 11 April 2007: A reader has commented on difficulties in implementing the hack above, and asked for alternative. I have published an alternative way to indent your paragraphs at Another way to indent your paragraphs (click "BACK" button to get back to this page).