This tutorial will tech you how to apply text, or some other layer shape, displaced on background layer.

Step 1.

First, start by creating new document, sized 600×600 pixels. Then open up some image, of your choice. For this tutorial I’ll be using my own image hosted here in wallpapers section. Click on that image you open, and drag it’s background layer into your newly created document. Resize it so it fits your document (press ctrl+t to resize) and move it around until you get a nice crop.
New document 600x600px

Step 2.

Now, press File -> Save as. For format of saving choose Photoshop PSD format. Be sure to uncheck Layers checkbox. Save your file as “displacement.psd” Again, press File -> Save as. But now check layers checkbox, and save your file as “original.psd”.

Step 3.

Now continue your work on file “original.psd”. Create a new text layer and type your desired text. In this tutorial I’ll type “FinalDesign Studio”. Choose some bold font (we used impact), and resize it until your satisfied with it’s size. I did it like this:
Text entered and resized

Step 4.

Now right-click on text layer and choose Blending Options. Check the Drop Shadow, and enter the options as shown on image below:
Drop Shadow Settings
Continue to Inner Shadow, check it, and enter the options as on image below:
Inner Shadow Settings
Now, check the Bevel and Emboss, enter the options as shown on next image:
Bevel and Emboss
And finally, check the Color Overlay, and for the color choose #fb532c. Click OK to close Blending Options menu.

Step 4.

For now your image should look something like this:
Current look
Now, as your text layer is still selected click on Filter -> Distort -> Displace. Click on OK when Photoshop ask you to rasterize the type. In the Displace menu, enter 16 for Horizontal Scale, and enter 14 for Vertical Scale. Then check for “Displacement map: Tile”. For “Undefined Areas:” check “Wrap Around”. Click on OK. When “Choose a displacement map” windows opens, choose that document you saved before, called “displacement.psd”.


Then to finalize add some blur by clicking on Filter -> Blur -> Gaussian Blur. For “Radius:” enter 0,3 pixels and click OK. Final result should look like this:
Final result