The simplest kind of Excel drop down list is created using the Excel data validation options. To do this:

1. Enter your possible options values into a column (eg. cells A1 to A10) - you can always hide this column later if you don't want it visible.
2. Select the cell (or cells) that you want your drop-down list to appear in (cell C2 in the example on the right).
3. In Excel 2003: Select the Data Menu from the top of your Excel spreadsheet and from within this menu, select the option Validation...

or

In Excel 2007, 2010 or 2013: Select the Data Tab from the top of your Excel spreadsheet and from within this menu, select the option Data Validation→Data Validation...

4. The Validation menu will appear. Within this menu :

Your selected cell should now contain a drop-down menu containing your list of possible values.

To tidy up the spreadsheet, you might want to hide the column that contains the orignal list.

The resulting spreadsheet is shown on the left.