
If you follow these steps, you will make something that looks like this:
Step One - New Document
Open Photoshop. Go to File > New and make sure you have the following before clicking OK:
Width: 400px
Height: 100px
Resolution: 72px/inch
Color Mode: RGB Color 8 bit
Background Contents: Transparent
Step Two - Stock Picture

I have chosen to use a picture of a character from .hack. Click on the thumbnail below and then save a copy to your computer. Once you have done that, open the picture up in Photoshop. Under Layers [if it is not open press F7 or go to Window > Layers], right-click "Background" and select "Duplicate Layer". This makes a spare copy of your background in case you stuff up! Now click the eye on the Background layer to make it invisible.
Step Three - Cleaning Up

Click on the eraser tool and select Basic Brushes. Scroll down until you get to the brushes with the feathered edges. Pick the 60 brush and then proceed to delete all the white and text of the stock picture. Then, pick a smaller brush (10 or 20) and clean the edges until your stock picture looks like the one on the right.
Step Four - Insert

Once you are satisfied with your picture, go to Image > Image Size and change the width to 200px. The height should automatically change to 150px. Press OK and then drag your stock picture into the new document we made in Step One. Position it so it looks something like the right.
Step Five - Border

We will go for a simple black border. Under Layers, look for the icon on the left of the trash can and click. It should make a new layer called Layer 2. On the left hand bar, you will see two coloured squares - one black and one white. If not just click on the smaller set of squares on the bottom left. Click on the Paint Bucket which is on the right of the Eraser Tool. If you can't see it, click on the icon that is there and hold down; a drop down menu should come up and you should select Paint Bucket. Fill Layer 2 with black!
Using the Select Tool select the top left section of the sig. Using the keyboard, press down once, and left once and then hit the delete key. This should leave a 1px border in the left hand corner. Repeat for the other corners.
Step Six - Background

Click on the top coloured square and and a box called Color Picker should come up. Hover over the picture and you will see an Eye Dropper. Click and it will choose the colour you were hovering over, then press okay. Fill Layer 1 with this colour using the Paint Bucket Tool. If you want, make a new layer and use some brushes to fill up the empty space. I am using "Textual" from
aethereality.net which is one of my favourite brushes because it is so simple yet very effective. You can play with the opacity to make things transparent.
Step Seven - Text

This is the last creative step! Choose a colour for your font from the picture, and then click the Font Tool (See the big letter T?). Type in your text and make it rather large perhaps 40 - 60pt. If you want you can add subtext but it isn't necessary!
Final Step - Avatar

Make a new document with dimensions 100x100. Drag the layers you want to create a matching avatar! And your set is complete!