Shadows can be ray traced (default) or shadow-mapped. If you want to have soft shadows, the easiest is simply to type a number different from zero in the field 'Softness' in the object properties panel, top right corner of your screen (you don't even need to edit the sun's properties, you just need to have the sun selected). These ray traced soft shadows are slow to render and require high quality values to eliminate the grain. An alternative to this (not as accurate and with other side-effects) is to use shadow maps. For this, you need to edit the sun object, click on 'Use shadow maps' (or similar, I'm writing this by memory) and then select "shadow maps". One important factor is the first number, which has 512 by default. This will mean really soft shadows (and very inaccurate). If you increase this value to, say, 4096, you still have soft shadows but more accurate (but computation requires more memory).