You can use the Pathfinder filter to create interlocking shapes and letters. Here are the instructions to do this:
Draw your stroked only paths or enter your type. (Note: if you are using text remember to create outlines first) For strokes, go to Object, Path, Outline Stroke. Overlap the shapes.
Select all the overlapping objects. Go to the Pathfinder palette (under the window menu) and choose Divide. Now any overlapping areas are defined as separate objects which can be individually filled in.
Use the direct selection tool (the arrow that is filled in white under the main selection tool on the pallet) to select areas to fill in to create an overlapping effect. Remember to change the fill, not the stroke color.