Magnesium powder or shavings are useful in many experiments in amateur chemistry as a reducing agent. It is also interesting to burn, although repeated burning is discouraged due to the production of harmful UV rays. There are several ways to obtain magnesium in a more finely divided form.
Buy it: You can buy magnesium turnings for a relatively low price ($4.50 for 50 grams at AlphaChemicals). However, magnesium powder has some shipping restrictions on it.
Knife: When a magnesium bar is scraped, large shavings and flecks of magnesium metal come off. These flecks are useful for reductions and sparkles in pyrotechnic compositions but are less than ideal for thermites or other reactions that need a finely divided form of magnesium.
File: I have found a file to be the best way to create small amounts of finely powdered magnesium. Rubbing the magnesium against the file over a piece of paper allows the magnesium to be collected on the paper. It can later be mixed in with any oxidizer and used to create a variety of energetic mixtures.
Steel grinder: Electric grinders, though much faster than hand, tend to create air currents that blow most of the superfine magnesium powder away. Powder can be created this way but with a large amount of waste.
My first thermite reaction burnt relatively quietly as it used magnesium shavings. The last one, which used a similar oxidizer with magnesium powder, burnt much more rapidly, noisily, and quickly, showing the benefit gained by using powder (generated by a file) instead of shavings.