1. Take the image you are going to use, i'm going to use this one:



2. Now take out your selection tool and set it to 'Rounded Rectangle'.



3. Make a new layer and fill it with white. (color: #ffffff)
4. Now make a selection in the middle of the white layer, whatever size you like - mine was like this:



5. Now go to Selections > Modify > Smooth and set the smoothing amount to 10.
6. Go to Edit > Copy > Paste As New Layer.
7. The new few steps are really important so make sure you follow carefully. Go to Selections > Modify > Contract and set the number of pixels to 4. Now press DELETE.
8. Go to the layer you filled with white, this should be layer 2. Delete this layer. You should now have this:



9. Your rounded selection should still be visible, if not you've gone wrong and need to start again. Click on the layer which has the orignal image. (In this case Beyonce) and go to Edit > Copy. Now go to Edit > Paste As New Layer. Go back to the layer with the orignal image and delete. You should now have this:



10. Now you can either merge the top 2 layers to paste onto another image or add a background - you decide! Any problems with this tutorial? Leave me a comment on the home page and I will get back to you ASAP :)