There were several recent threads created discussing normal bathroom shower issues with tile and windows in them, in one I had briefly discussed some work I recently did in a remodel and figured I would start my own thread with a picture and discussion with what I did and maybe give others an idea or two to use on their own project.
The shower had several issues, including loose tile and rotted awning window. While I completely HATE windows in showers, sometimes they are a necessity and this bathroom was no different, without the window, you couldnt see your hand in front of your face on a bright sunny day and nothing beats natural light.
Windows should be used for lighting only though, ventilation should always be done via exhaust fan, opening a shower window just creates more moisture/steam etc and creates additional problems. Glass block is one option to fix this issue and while I dont mind it in basement windows, not a huge fan of the look in showers. With that I ended up designing and building my own custom window.

First I had a friend who owns a glass company build thermopane frosted glass to my dimensions, I then routed and built a complete frame out of PVC trim, if you notice, I made the inside ledge very slim so less water lays on it and people have no room to be storing bottles and other junk on it.

The entire shower was gutted and then covered in schluter kerdi membrane, this is the first I ever used this product http://www.kerdi-line.com/ and while it is expensive, its abilities are amazing, no tile backer needed, just regular drywall, then thinset the membrane directly to it. It is also adhered directly via a special caulk/glue to the window frame so even if water got behind the tiles, its all still water tight. If you look over their site, the possibilities are only limited to your own imagination and abilities.
I took the picture at night because the window is so bright and lets in so much light the pictures werent turning out, lol.

Sort of off subject but worth a mention, in this same bath we had hot water baseboard heat and decided to take it a step farther so we put a new cast iron tub back in, but before installation we added a heating element on the exterior wall behind the tub which turns what would be cold tub in the winter to a toasty heater, works great.