Right click on the desktop and choose Properties.
Move to the Appearance tab.
From the Item drop down list select Icon (did I hear you say this was obvious?). 
Select a font of your choice.

The font choice will effect the title under your desktop items as well as the display of Explorer. One of the fonts I recommend is the Garamond font. This is a rather wide serif font. I use it at 1024x768 at size 9 (!). Not only is it still readable at that size on a 17" monitor, but the real benefit is that a small font will let you see more of your files. Try it out!

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