Dynamic SoftShadows by Matt_Aufderheide
This shader has appeared a while ago, but (probably) the lack of a demo has stopped many users from trying it. The benefits are obvious:
I have created a small script file for the demo, but the main idea is this: copy softshadow.fx, shadow_color.tga and softshadows.wdl inside your game folder, and then place the following line of code:
render_shadows();
at the beginning of the action that is attached to your model. That's all! Oh, and don't forget to include softshadows.wdl in your main script file.
The original code needed a few minor tweaks, but it works very well, especially if the floor has a darker color. The entire project is available inside the downloadable archive; go to Resources -> Downloads to get it.