This is a youtube video that shows exactly how to add this feature to your blog. Great tutorial and he shows every step.
Here are two more sites that give complete instructions.
Since Google Friends Connect doesn't support the new .com or .net blogs, this is a great one for newcomers to add. It is also a super one for those on Wordpress to add. Just makes it so easy to click a button and follow right on the dashboard and that way you see a new post every time it comes up without having to weed through a long list of emails. At least it is easier for me anyway.
Be sure to click on my Birthday Giveaway on the side bar and enter. Two great Decorating Book you will love.