The pen tool allows you to create your own custom shapes in the form of a work path. If you are familiar with Adobe Illustrator, you will have an easier time 'grasping' the pen tool (no pun intended). Paths are mathematical calculations which Photoshop remembers that don't take up much disk space. Once you create a path from the pen tool (or shapes tools), you can do different things to it.
You can stroke a path (add an outline highlight), fill (with color), you can also make a selection out of a "path". Think of the pen tool as similar to the polygonal lasso tool except you have more control over it because you have path editing options such as getting rid of 'anchor' points anywhere that you have clicked along to make your path (outline).
So, you can create funny shapes with the pen tool, meaningful shapes, or use them to create complex (or simple) selection outlines to store as a path. You may have to convert a Path into a layer to do something more with it. To do this; just make a selection from the path palette, create a new blank layer and then stroke or fill pixels onto the new layer.
Here are two objects created with the pen tool shown in the Paths palette; one with the Shapes option and the current as a Work Path option.
The Pen tool gives you maximum control over creating a very complex (pre) selection which you can then save as a work path in the .PSD file. Unfortunately, it takes a while to learn how to effectively use the pen tool and longer to master it (I still haven't mastered it). The First Edition covers several tutorials on using the pen tool and creating work paths. When the path you've created is stored you can create a selection out of it in the paths palette. You can hide paths and click them on and off so they can be out of your way when you don't need them.
You can also create work paths from the shape tools, where your options are fill pixels, shapes layer, shape path. Click here for the article on Shapes. The pen tool is a way you can create custom shapes or advanced selections and store as work paths. It is best learned visually (duh).
Note: Pen tool allows you to convert points so you can create handles that you can flex and adjust the lines between two point into arcs so you can cover all aspects of any selection (with true mastery).



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