With the release of ArcGIS Desktop 9.3.1 the ability to create layer packages was introduced. Layer packages encapsulate the data, cartography, and other properties of the layer as it's authored in ArcMap (or ArcGlobe) into one easily shareable package.
Layer packages can be shared with other ArcGIS Desktop users, shared on ArcGIS Online (public beta soon), and are also supported in ArcGIS Explorer 900 along with layer files. What's significant for Explorer users is that now the cartographic capabilities of ArcGIS Desktop can be seen using Explorer. In the past only simple rendering options were available in Explorer for local data sources, now these are expanded to include ArcGIS Desktop cartography via layer files and layer packages.
ArcGIS 9.3.1 was released not long ago, and ArcGIS Explorer 900 is currently in Beta. But since you may want to begin to create layer packages now for use in Explorer 900 when it becomes available we thought we'd cover a few basic pointers on how to create good layer packages.
We began by downloading some data and an ArcMap document (.mxd file) from the USGS. The data we downloaded was from an open file report with data from the Engineering aspects of karst map.
We downloaded the data, started ArcMap, opened the provided map document, and this is where we started. Our goal for this post was to take the karst_polys_polygon layer in the map and share it as a layer package with ArcGIS Explorer 900 users.

You can see the data (from a personal geodatabase) is already symbolized so we have a good start. But there's a few things we want to do during the process of authoring the layer package that will ensure those we share the layer package with have the best possible experience and that we present the data in the best possible way. We think authoring is a good way to think about this process, and we'll step you through the basics of what to consider.
Step 1: We opened the layer properties and began with the General tab.

The default name for a layer is the same as the layer source. In this case the layer was named karst_polys_polygon which isn't particularly user friendly. So we changed the name and added a brief description and credits. We gave the layer the same name as the title of the map, and added the description from information we found on the USGS Web site.
Step 2: Symbology tab

In this tab we checked off the all other values option since it's not needed and will appear in the final legend. We also changed the label for the heading of the field that was used for the unique value rendering. The original label was the same as the field name - K_TYPE - and doesn't provide a lot of meaning. So we changed that to Karst Type to make it more user friendly and understandable.
We also noticed in the original map document that some polygons were outlined and some were not. So we changed the symbol properties so that all polygons were represented in a similar way (not outlined).
Step 3: Fields tab
All of the fields were checked on for display, the default for a layer. But most of these fields offered little valuable information. We didn't want the recipient of our layer package to see irrelevant fields like OJBECTID, SHAPE, and others. So here we checked them off except for the two that provided the essential information.
We also changed the not-so-friendly K_TYPE and DESCRIPT to the more user friendly Karst Type and Description by entering aliases for the field names.
Step 4: HTML Popup tab

The HTML popup tool is new at ArcGIS 9.3.1, and this tab controls its properties. For Explorer users this is important because it also controls how the popup looks when the feature is clicked. By default the HTML popup tool is disabled, so first we check it on. We leave the default option on for displaying a table of the visible fields. The Verify... button allows us to preview how the popup looks in ArcMap, and how it will look in Explorer.

Here you can see the two remaining fields we've left checked on (remember we turned off all the ones that didn't make sense in Step 3 and also created field aliases). This is a preview of what the popup will look like, and it has all the essential information we want. At this point we make sure we save all of our changes.
Taking a look at this in ArcMap we see the new HTML Popup tool on our toolbar, highlighted with the red arrow below. The green arrow points to the Identify tool.

And we can compare Identify and the HTML Popup tools below. First we use Identify:

And below is what things look like using the HTML Popup tool:

Note the leader tail to the clicked location, the shadow effect around the popup, and the styled view of our attributes - a much nicer way to view the information.
Step 5: Create the layer package
Now that we've finished making changes we can create the layer package. This will encapsulate the data and capture our cartography and other changes we've made to our layer in one easily shareable package. To create the layer package we right-click the layer and choose Create Layer Package....

It takes just a few seconds, and when finished we see the following message. Note that the layer package has an extension of .lpk.

Now we'll open the layer package in Explorer 900. You can drag and drop the LPK file directly onto Explorer, or use the Add Content and choose ArcGIS Layers...

Below we see the layer package added to ArcGIS Explorer 900.

Things to note are:
- the original data source was a personal geodatabase, which has been encapsulated in the LPK file and is now being used by Explorer 900
- the layer name is the same as we saved from ArcMap
- the data is displayed using the same cartography as authored in ArcMap
- the legend is exactly the same as in ArcMap
- the popup window is styled as we've defined in Step 4 and is the same style as we saw using ArcMap's HTML Popup tool
- the layer packages looks exactly the same in 2D mode and 3D mode
If we shared this on ArcGIS Online (beta to be announced soon) the description we entered would automatically appear with our shared content. Here's a snapshot of the current development site after we shared our layer package. We've searched using the keywords USGS and Karst and can see the description we entered in the layer properties in ArcMap that have been read directly from the layer package when we shared it on ArcGIS Online.

You can now understand how layer packages open up a whole new world for sharing data not only with other ArcGIS users, but also with a much broader audience using ArcGIS Explorer. Using these basic steps you can confidently create layer packages now for use in ArcGIS Explorer 900 soon... And we'll cover this in more detail as we get closer to Explorer 900's public release.