I get asked this once or twice a month.
“Does CRM 2011 allow me to configure cascading dropdowns out of the box?”
There is no “out of the box” way to do this using point and click customization through the CRM UI. I find that when people hear “not out of the box” they immediately think “must write code.” I see this all the time in xRM implementations. Lots of cut and paste code that does the same thing. Developer minded folks tend to have that “I can turn this into a reusable library that power users can ‘configure’ by passing parameters to the web resource.” That’s the key, build your web resources to be reusable where possible.
This offers a “no code” solution for the power user because the code is already written. All the power user needs to know is how to wire up the web resources on the form/field events and what parameters to pass to get it all working.
UPDATE: Someone pointed out that “in 2011 you can create dependent options sets OOB by using custom entities and filtered lookups.” That’s an excellent point. It really depends on whether you want to use lookups or dropdowns. I do plan on putting together a sample that builds off of my Displaying a lookup as a dropdown in a CRM 2011 form sample to show the filtered lookup approach.