HowtoForge has written a tutorial on preventing SSH dictionary attacks with DenyHosts.
Read the tutorial here.
In this HowTo I will show how to install and configure DenyHosts. DenyHosts is a tool that observes login attempts to SSH, and if it finds failed login attempts again and again from the same IP address, DenyHosts blocks further login attempts from that IP address by putting it into /etc/hosts.deny. DenyHosts can be run by cron or as a daemon. In this tutorial I will run DenyHosts as a daemon.