Update: The earliest publication of this idea I am now aware of is:
Gorazd Planinsic, Phys. Teach. 39, 76 (2001), DOI:10.1119/1.1355162
This paper can be freely downloaded here. A formula for calculating the approximate magnifying power of the projector based on the radius of the droplet, the refractive index of the liquid, and the distance to the screen is given on p. 20.
Inspired by this page over at Teravolt.org, this project is near the top of the list when it comes to getting the most bang for your buck. Whether you’re a scientist yourself, a science educator, or just, you know, a bright curious monkey, this is one of those you really have to try for yourself.
The tricky part is getting everything aligned just right–the laser, the projection surface, the hanging drop of water–but this simple stand from junk-box odds and ends makes it much, much easier. The laser and syringe are mounted to broom clips on supermagnet bases which allow for easy positional adjustments, but hold strongly enough to keep everything positioned once you’ve got it tuned right. You can even pick the whole thing up and move it to another surface without perturbing the alignment.