Blender is able to produce soft shadows from any of its main lamps, quite easily. But we would still have to deal with the main usage for area lights (in order to answer to a very frequently asked question by many beginners), that is achieving shadows with soft borders, useful for simulating the lighting of a supermarket, a computer screen or a cloudy outdoor.

This article shows the usage of soft shadows, and then of the Area ligths whose settings are sometimes difficult to master.

For Blender: 2.50 Alpha 2 or better