1.Login to your blogger dashboard--> layout- -> Edit HTML

2.Don't Click on "Expand Widget Templates"

3.Scroll down to where you see ]]></b:skin> tag:

4.Copy below code and paste it just before the ]]></b:skin> tag.

ul.thumb {
float: left;
list-style: none;
margin: 0; padding: 10px;
width: 360px;
}
ul.thumb li {
margin: 0; padding: 5px;
float: left;
position: relative;  /* Set the absolute positioning base coordinate */
width: 110px;
height: 110px;
}
ul.thumb li img {
width: 100px; height: 100px; /* Set the small thumbnail size */
-ms-interpolation-mode: bicubic; /* IE Fix for Bicubic Scaling */
border: 1px solid #ddd;
padding: 5px;
background: #f0f0f0;
position: absolute;
left: 0; top: 0;
}
ul.thumb li img.hover {
background:url(http://4.bp.blogspot.com/_p4Te9Li52fs/So9a2fSh2jI/AAAAAAAAAAc/VX0mAW1oYHc/thumb_bg.png) no-repeat center center;  /* Image used as background on hover effect
border: none; /* Get rid of border on hover */
}

Note : Please host 'thumb_bg.png' image yourself.

5.Scroll down to where you see </head> tag:

6.Copy below code and paste it just before the </head> tag.

<script src='http://code.jquery.com/jquery-latest.js' type='text/javascript'/>
<script type='text/javascript'>
$(document).ready(function(){

//Larger thumbnail preview

$(&quot;ul.thumb li&quot;).hover(function() {
$(this).css({&#39;z-index&#39; : &#39;10&#39;});
$(this).find(&#39;img&#39;).addClass(&quot;hover&quot;).stop()
 .animate({
  marginTop: &#39;-110px&#39;,
  marginLeft: &#39;-110px&#39;,
  top: &#39;50%&#39;,
  left: &#39;50%&#39;,
  width: &#39;174px&#39;,
  height: &#39;174px&#39;,
  padding: &#39;20px&#39;
 }, 200);

} , function() {
$(this).css({&#39;z-index&#39; : &#39;0&#39;});
$(this).find(&#39;img&#39;).removeClass(&quot;hover&quot;).stop()
 .animate({
  marginTop: &#39;0&#39;,
  marginLeft: &#39;0&#39;,
  top: &#39;0&#39;,
  left: &#39;0&#39;,
  width: &#39;100px&#39;,
  height: &#39;100px&#39;,
  padding: &#39;5px&#39;
 }, 400);
});

//Swap Image on Click
$(&quot;ul.thumb li a&quot;).click(function() {

 var mainImage = $(this).attr(&quot;href&quot;); //Find Image Name
 $(&quot;#main_view img&quot;).attr({ src: mainImage });
 return false; 
});

});
</script>

7.Now Click on "Save Templates"

8.Now go to Layout-->page elements and Click on 'Add a Gadget'.

9.Now Select 'HTML/Javascript' and add the code given below and click save.

<ul class="thumb">
<li><a href="#"><img src="picture1 Link" alt="" /></a></li>
<li><a href="#"><img src="picture2 Link" alt="" /></a></li>
<li><a href="#"><img src="picture3 Link" alt="" /></a></li>
<li><a href="#"><img src="picture4 Link" alt="" /></a></li>
<li><a href="#"><img src="picture5 Link" alt="" /></a></li>
</ul>

Note : Replace picture1 Link,picture2 Link,picture3 Link,picture4 Link,picture5 Link,..... with your images links.