This is a great blogger hack from www.bloggerplugins.org .In this post I explain how to add this related post widget to blogger by hosting java script in blogger.It will help your template load faster.But If you don't want this method read the original article from here.

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

2.Click on "Expand Widget Templates"

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

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

<!--Related Posts with thumbnails Scripts and Styles Start-->
<b:if cond='data:blog.pageType == &quot;item&quot;'>
<style type='text/css'>
#related-posts {
float:center;
text-transform:none;
height:100%;
min-height:100%;
padding-top:5px;
padding-left:5px;
}

#related-posts h2{
font-size: 1.6em;
font-weight: bold;
color: black;
font-family: Georgia, &#8220;Times New Roman&#8221;, Times, serif;
margin-bottom: 0.75em;
margin-top: 0em;
padding-top: 0em;
}
#related-posts a{
color:black;
}
#related-posts a:hover{
color:black;
}

#related-posts  a:hover {
background-color:#d4eaf2;
}
</style>
<script type='text/javascript'>
//<![CDATA[

//Script by Aneesh of www.bloggerplugins.org
//Released on August 19th August 2009
var relatedTitles = new Array();
var relatedTitlesNum = 0;
var relatedUrls = new Array();
var thumburl = new Array();
function related_results_labels_thumbs(json) {
for (var i = 0; i < json.feed.entry.length; i++) {
var entry = json.feed.entry[i];
relatedTitles[relatedTitlesNum] = entry.title.$t;
try
{thumburl[relatedTitlesNum]=entry.media$thumbnail.url;}


catch (error){
s=entry.content.$t;a=s.indexOf("<img");b=s.indexOf("src=\"",a);c=s.indexOf("\"",b+5);d=s.substr(b+5,c-b-5);if((a!=-1)&&(b!=-1)&&(c!=-1)&&(d!="")){
thumburl[relatedTitlesNum]=d;} else thumburl[relatedTitlesNum]='http://1.bp.blogspot.com/_u4gySN2ZgqE/SosvnavWq0I/AAAAAAAAArk/yL95WlyTqr0/s400/noimage.png';




}

if(relatedTitles[relatedTitlesNum].length>35) relatedTitles[relatedTitlesNum]=relatedTitles[relatedTitlesNum].substring(0, 35)+"...";
for (var k = 0; k < entry.link.length; k++) {
if (entry.link[k].rel == 'alternate') {
relatedUrls[relatedTitlesNum] = entry.link[k].href;
relatedTitlesNum++;


}
}
}
}
function removeRelatedDuplicates_thumbs() {
var tmp = new Array(0);
var tmp2 = new Array(0);
var tmp3 = new Array(0);
for(var i = 0; i < relatedUrls.length; i++) {
if(!contains_thumbs(tmp, relatedUrls[i]))
{
tmp.length += 1;
tmp[tmp.length - 1] = relatedUrls[i];
tmp2.length += 1;
tmp3.length += 1;
tmp2[tmp2.length - 1] = relatedTitles[i];
tmp3[tmp3.length - 1] = thumburl[i];
}
}
relatedTitles = tmp2;
relatedUrls = tmp;
thumburl=tmp3;


}

function contains_thumbs(a, e) {
for(var j = 0; j < a.length; j++) if (a[j]==e) return true;
return false;
}
function printRelatedLabels_thumbs() {
for(var i = 0; i < relatedUrls.length; i++)
{
if((relatedUrls[i]==currentposturl)||(!(relatedTitles[i])))
{
relatedUrls.splice(i,1);
relatedTitles.splice(i,1);
thumburl.splice(i,1);

}
}


var r = Math.floor((relatedTitles.length - 1) * Math.random());
var i = 0;

if(relatedTitles.length>0) document.write('<h2>'+relatedpoststitle+'</h2>');
document.write('<div style="clear: both;"/>');
while (i < relatedTitles.length && i < 20 && i<maxresults) {


document.write('<a style="text-decoration:none;padding:5px;float:left;');
if(i!=0) document.write('border-left:solid 0.5px #d4eaf2;"');
else document.write('"');
document.write(' href="' + relatedUrls[r] + '"><img style="width:72px;height:72px;border:0px;" src="'+thumburl[r]+'"/><br/><div style="width:72px;padding-left:3px;height:65px;border: 0pt none ; margin: 3px 0pt 0pt; padding: 0pt; font-style: normal; font-variant: normal; font-weight: normal; font-size: 12px; line-height: normal; font-size-adjust: none; font-stretch: normal;">'+relatedTitles[r]+'</div></a>');


if (r < relatedTitles.length - 1) {
r++;
} else {
r = 0;
}
i++;
}
document.write('</div>');

}

//]]>
</script>
</b:if>
<!--Related Posts with thumbnails Scripts and Styles End-->

5.Now scroll down to where you see below code:

<div class='post-footer-line post-footer-line-1'>

NOTE: If you can't find <div class='post-footer-line post-footer-line-1'> in your template,find <data:post.body> instead of it.

6.Copy below code and paste it just after above code.

<!-- Related Posts with Thumbnails Code Start-->
<b:if cond='data:blog.pageType == &quot;item&quot;'>
<div id='related-posts'>
<b:loop values='data:post.labels' var='label'>
<b:if cond='data:label.isLast != &quot;true&quot;'>
</b:if>
<b:if cond='data:blog.pageType == &quot;item&quot;'>
<script expr:src='&quot;/feeds/posts/default/-/&quot; + data:label.name + &quot;?alt=json-in-script&amp;callback=related_results_labels_thumbs&amp;max-results=6&quot;' type='text/javascript'/></b:if></b:loop><a href='http://www.bloggerplugins.org/2009/08/related-posts-thumbnails-blogger-widget.html' style='display:none;'>Related Posts with thumbnails for blogger</a><a href='http://www.bloggerplugins.org/' style='display:none;'>blogger tutorials</a>
<script type='text/javascript'>
var currentposturl=&quot;<data:post.url/>&quot;;
var maxresults=5;
var relatedpoststitle="Related Posts";
removeRelatedDuplicates_thumbs();
printRelatedLabels_thumbs();
</script>
</div><div style='clear:both'/>
</b:if>
<!-- Related Posts with Thumbnails Code End-->

Note: You can change 5 , Related Posts as your choice.

7.Now save your template and you are done.