Here is how:
Open a new Finder window and navigate to file, application or folder you would like to use as a shortcut.
Drag the selected item to the Finder's Toolbar and hold for a moment before dropping. You will notice a space open up for the shortcut. Once you notice this you can release the mouse button.
Press the CTRL key on the keyboard and click the shortcut to open a popup menu.
In the popup menu you could choose to display the shortcuts by Icon & Text, Icon Only, or Text Only.
To display the shortcut icons in a smaller size click Use Small Size
To remove a shortcut you would select Remove Item from the popup menu.
Apple has been kind enough to offer us some shortcut suggestions. Select Customize Toolbar... from the popup menu.
A popup window will appear with a few common shortcuts you might want to add to your toolbar. Simply drag a shortcut icon from the popup window to the toolbar to add it. If you want to return to defaults settings then drag Leopards default set into the toolbar.
Click Done to close the popup window.