So I absolutely love the support for pixel shaders in Silverlight 3. You can apply some pretty cool effects (DropShadow and Blur are built in), or you can apply custom effects.
The method for producing custom shaders in SL3 is the same as WPF, which means that any custom shaders that are produced for WPF should work for Silverlight (this is a big assumption as I haven't tried it yet)
Creating custom pixel shaders is not the sort of task that everyday coders (including me), do. However any shaders produced by other people, we are quite happy to use.
In codeplex there is a nice custom shader library for WPF (for which I see no reason wouldn't work for silverlight 3, caveat is I haven't tried it yet).
Effects: BandedSwirl, Bloom, BrightExtract, ColorKeyAlpha, ColorTone, ContrastAdjust, DirectionalBlur, Embossed, Gloom, GrowablePoissonDiskEffect, InvertColor, LightStreak, Magnify, Monochrome, Pinch, Pixelate, Ripple, Sharpen, SmoothMagnify, Swirl, Tone, Toon, and ZoomBlur
I will try and grab some time, and try sticking one of the effects on SL3, and let you know the results