Creating Macros in System Preferences.
Open System Preferences (it's in the Apple menu at the top of your screen) and navigate to Language & Text > Text. There you'll find a Symbol and Text Substitution list. Click the + button to add a new item. For this example, put (tuaw) into the Replace column and The Unofficial Apple Weblog into the With column. Leave the box to the left of these items checked.
So why use the parentheses? Strictly speaking, they're not necessary. You can define text substitutions on any set of characters, as shown in the screen shot below. What these parentheses do for me, is that they distinguish between when I want to type TUAW and not have it expand, and when I want the abbreviation to transform into the full Weblog name.
Enabling Text Replacement
Text replacement works on a per-application basis. Many applications default to this feature being off. To make text replacement happen, right-click within any text entry area such as a composition window in Mail or the text entry field in Colloquy, etc. The contextual menu provides a Substitutions submenu. Make sure Text Replacement is checked. If it is not, select it to toggle the option from on to off or off to on.
Applying Text Replacment
The big secret to making text replacement happen, once you've defined the shortcuts and enabled Text Replacement in the contextual menu, is the space key. Snow Leopard does not apply the shortcut replacement until it detects you have finished typing a phrase. Only then does it perform its internal look up and substitution.
Also prepare to wait a second or so. The replacement text often lags behind your typing. So go ahead and keep entering text. The operating system will catch up and perform its substitution work without your oversight.
For Mike G., with TUAW affection