I found this funny. Few days ago, I receive a mail from my friend. It is about the art of paper. I bet you see this before but that is real photo. However, I think over and figure it out. Now, I am going to create the paper cut art with Photoshop.
1. Open a document with 400 X 350 px, RGB, 72 DPI with white background. Immediately, create a new layer and rename it as paper. Apply this setting:
Gradient Overlay
Blend mode: normal
Gradient from #69bbd3 (location = 65%) to white, reverse.
Angle = 90°
2. With the custom shape, choose a desire shape and draw with holding shift with white color. You can download my custom shape here. Apply the following setting for the shape:
Gradient Overlay
Blend mode: normal
Gradient from Black to white
Angle = 90°
Drop Shadow
Blend mode: multiply
Opacity: 15%
Distance: 1px
Size: 0px
Uncheck global light, Angle = -155°
3. Ctrl + J to duplicate the shape and right click on the copy shape and clear the layer style. Change the shape color to black for easy modification. Ctrl + T to enable the transform. Right click and select distort. Drag the top middle point as shown.
4. After confirm the transform. Ctrl + Left Click on the layer to bring out the selection. Select paper layer and press del.
5. Create a new layer and rename as inner. Draw as shown with the rectangle marquee tool. Drag a black to transparent gradient. Ctrl + Left Click on shape layer and select inner layer, click the add mask layer at the bottom of the layer palette.
6. Ctrl + J to duplicate shape layer again and change the color to black. Ctrl + T to transform. Select distort too and drag as shown.
7. Rasterize the transform shape and go to Filter > Blur > Gaussian Blur > 3px. Set the opacity to 25%. Put it below shape layer. Open the wood picture and place it below paper layer.
Done!
Download the PSD file here.
Below is another sample I did. Hope you enjoy this!
More Tutorials: 
