From Reading Rockets' website:
When beginning readers sound out words, they slowly say each sound in a word (c-a-t), and then say the sounds quickly together to "read" the word (cat). In reading, teachers call this blending because sounds are being blended together. Blending (combining sounds) and segmenting (separating sounds) are skills that are necessary for learning to read.
Here are a few activities to help master this skill...
Cut out some pictures from magazines or use pictures in books you have laying around the house. Tell your child you are going to say a word in the pictures using "Robot Talk" a slow way of saying words (e.g., /ssssssuuuuuunnnnn/). They have to look at the pictures and guess the word you are saying.
The following activity (see Yopp, M., 1992) is to the tune of "If You're Happy and You Know It, Clap Your Hands."
If you think you know this word, shout it out!
If you think you know this word, shout it out!
If you think you know this word,
Then tell me what you've heard,
If you think you know this word, shout it out!
After singing, say a segmented word such as /k/ /a/ /t/ and your child provides the blended word "cat."
Here is a great book to help reinforce these concepts...
Love good ol' Shel, but this book really hits on manipulating phonemes. All the beginning sounds are reversed. Your child will have fun trying to read it, but will also be learning how different letters create different sounds.
What other activities have you tried?