Also important, if you want real time shadows, you must set it to GLSL shader mode, which is not active by default I don’t think. Depending on your blender version, activating this is slightly different. I’m assuming you have 2.5, so in the 3D menu, hit n. In the menu that pops up on the right, find the “Display” tab and open it up. In the tab, find he drop down box labled “Shading:” (probably set to multi texture). Set that menu to GLSL. Create a spotlight, make sure it is using bufferd shadows, then voila. You should have shadows.
2.5 also has the game engine abilities in a seperate mode. Up on the top header, the drop down box that sais “Blender Render” should be set to “Blender Game”. That shows many of the menus that are required for game making.
For 2.49, if I remember correctly, you go to the game menu, in line with the file menu. In that menu there should be a option to change the shader mode.
Last thing. In order to use GLSL, you have to have a new-ish graphics card. I can’t remeber the exact specifications, but if your computer hardware is more than 5-7 years old, theres a possibility it might not work. I think…