An older version of Label widget, is only list type. As I said, this type need a lot of space. Label cloud become an alternative to simplify label display. Now you dont need to add any complicated script to get Label cloud. Blogger has installed cloud type for Label widget. Note: this is only text cloud not animated cloud widget.
How to set label cloud on my template? Go to Page Element>Add Gadget, choose Labels gadget. There are two options, list type or cloud type to display. You also can choose which labels you want to show. Such a helpfull featured.