There is a lot that can be done while the dog is young to desensitize to noise and help decrease noise phobias. Ignoring it and acting like nothing wrong however does not work.
Take a look at this article which is very helpful:
http://www.msnbc.msn.com/id/25267200/It is important to not coddle during the fear so as not to reinforce it, but also critical not to ignore it.
A big thing that helps is putting a tight fitting t-shirt on the dog to help decrease the barometric pressure (which is a big part of the danger signal and fear). Also, before resorting to hard medications, which are usually reserved for serious cases in adult dogs, try natural relaxants like
Serene, which includes GABA and valerian:
http://www.bestforyourpet.com/prod/serene.htmlSometimes Rescue Remedy helps some, but valerian and GABA are much stronger and usually more effective.
The other key thing to do is to mentally engage the dog - this shows that the rest of the pack does not see the issue as "danger" and that playing is therefore ok. Ignorning fails to demonstrate this. So engaging your dog in a treat based activity helps. I have one dog who is frightened of fireworks and this is including all booming noises like thunder. I shaped her as a puppy with shaping exercises and we can now play a hot/cold game whereby she has to identify an object in the room that I am thinking of by marking it with her nose - she gets treats for getting warmer and big rewards for nailing the item....we can play this game for a long time so it keeps her mentally engaged and she loves it, not focusing on the noise at all.
If all else fails, put the dog in the car and drive with relaxing music cranked up. The movement helps to eliminate the pressure they feel as well and usually do best in a car as a result.