You can, of course, resize the Dock by opening its pane in System Preferences and dragging the Size slider; you can also click and drag the dotted line that separates the applications from folder stacks. But while these tools can make the Dock small, they can’t make it really small.
To super-shrink the Dock, open up Terminal and enter defaults write com.apple.dock tilesize -integer 8. Press Return and then type killall Dock. The number at the end of the command can range from 1 (too small to be useful) to 16 (the smallest you can achieve through the usual methods).
To make the mini-Dock useful, you’ll need to turn on Dock magnification. (In the Dock preference pane, select the box next to Magnification and adjust the slider. The easiest way to get the Dock back to a more normal size is to open its preference pane again and use the Size slider; as soon as you click and drag it, your Dock will be back in the normal range.