Making words tiny with no distortion

What am I doing wrong?? Everytime I try to make something tiny...like a logo, a tatoo, or just simple words for a tshirt it gets distorted and all you see is pixels. How do you make something smaller with no distortion and smooth edges??? HELP!

One Word : Anti-aliasing

Rose, there's only so small you can go with text before it becomes illegible.

Whether it's text or anything else, the question you should be thinking about is does the body part on the template where you want to put the image contain enough pixels to support the image? Let's say, for example, you want to put a tattoo on the avatar's shoulder. Well, the shoulder area of the template is what, 50 pixels across? You can't expect to fit a whole lot of text in a 50x50 space. It's just not gonna happen.

You can certainly fit some though. The first key is to use images that are simple enough. In other words, don't expect to fit the encyclopedia on a postage stamp. Could you put a smiley face on your avatar's shoulder? Absolutely. Could you put a portrait of your grandmother? Not likely. Could you put your initials? Sure. The Declaration of Independence? Absolutely not.

The second key is, as Cindy said, anti-aliasing. If you are using Photoshop, take a look at the tool settings at the top of the screen when you have the type tool selected. The right most dropdown menu is for selecting the anti-aliasing mode to use for the text. Available choices are none, sharp, crisp, strong, and smooth. You'll find that different modes work well for different fonts at different sizes, so try with them all.

For example, with the Myriad font (Photoshop's default), if you select the smooth mode, you can get as small as 6pt before the text becomes completely illegible. In any other mode, it won't be legible at all at that size. For other fonts, other modes are best. Play around.