Small tutorial:
Enter the following data:
Cell A1 : First
Cell A2 : Second
Cell A3 : Third
Cell A4 : Fourth
You now have a short list of values in a column in the top left corner of your worksheet from first, to fourth.
Select cell B1
Click the "Data" tab on the ribbon.
Click the "Validate" tool button.
Set the Data Validation window that appears:
Set the "Allow:" drop down to "List".
In the "Source:" box enter the following : =$A$1:$A$4
Click "OK"
You should now see that cell B1 has a drop down selector beside it. If you click on it, a drop down will appear listing First, Second, Third, Fourth.
That is a basic example. Hopefully that will get you started.
The source list, doesn't have to be in the same worksheet.
The source list can be set by click and drag selection of the range of cells containing the values. The range has to be in a single column or single row, it can't be a rectangular block.