What exactly is baking? Ive heard that you can use it to copy the rendered shadows of stationary objects into texture and use them in the game engine. Is this true? if so could someone show me how??
Make a new UV image for the object. Unwrap it. Set up lighting and such for the render, press Ctrl-Alt-B and select “Full Render.” Ta-da. 
If your baking a character it’s best to use a 3 point lighting setup. If your doing a town I’d recommend AAO baking and maybe some radiosity.