Preparations:
Before we start, we need to have 5 different images. A nice sky as background, a cone-shaped mountain, patch of grasses, some roots and bushes.
All rights of these resources belong to their respective owners.
Step 1 - Setting Up Background:
Create a document of size 670 by 493px and drag the sky as background layer in the document.
Create a new layer and call it as white. Using a large Soft Brush tool with color #FFFFFF, paint the lower half of the sky as seen in the diagram.
Step 2 - Cropping a Mountain:
Next thing, you shall crop the cone-shaped mountain with the Pen tool.
Just a rough outline will do since rocks are suppose to look edgy.
Step 3 - Forming the Base:
Drag your mountain on top on the white layer and rotate it such that the tip of the mountain is facing down.
Using the Burn tool, burn some parts on top and right of the mountain so the light source seem to come from the bottom left.
Step 4 - Drawing the Surface:
Create another new layer and name it as draft.
With a Pen tool, draw out roughly how you want the top flat surface to look.
This will give you a better idea of how to patch the grasses later.
Step 5 - Duplicate the Grasses:
Let's proceed on to the grass.
Duplicate several of this grass image and tile them seamlessly by blending their edges with a large Soft Eraser tool.
Step 6 - Patching the Grasses:
Drag the grasses on top of the draft layer and set its Opacity to 50%.
Go to Edit > Transform > Distort and transform the grasses the way you see it in the diagram.
Ctrl-click on the draft layer to load its selection. Select the grass layer, go to Select > Inverse then press Delete.
Step 7 - Touching Up:
With a small size of Smudge tool around 2px, pull the edge out of grasses randomly.
You can do this as many times as you like. The more the better.
Step 8 - Adding the Roots:
Using the Pen tool, path out some of the roots and drag them into the document.
I darken them with the Burn tool so it blends in better with the mountain.
You may do this several times more for other positions of roots.
Step 9 - Adding the Bushes:
Similar to Step 8, do the same for the bushes.
Blend the bushes with the mountain by erasing their edges with the Soft Eraser tool.
Step 10 - Drawing the Clouds:
Last thing you need to do here is to create another new layer call clouds.
Use a large Soft Brush tool size 300px with 20% opacity to dot a few patches of clouds above all these images.
Optional:
You can duplicate a few more of the islands you've just created. Make them blur and scale them smaller so they look far away.
Then start to decorate what you wish to have on the surface of your floating island!
More Tutorials: 
