The first letter is a drop cap, the top of which is even with the top of the first line of text. The second line starts BELOW the drop cap. This leaves a larger gap between the first line and the subsequent gap as compared to other drop cap techniques.
My first letter is floated to the left. This means that each line that is within the height of the drop cap aligns next to it. Any additional lines will wrap below it. There is an additional padding given to the drop cap so as not to bunch up with the text.