Step 1: Choose a small Rounded Rectangle tool: 
and
create this shape:
Step 2: Choose Filter > Distort > Wave:
Step 3: Set these options:
Step 4: Click on Shape 1 holding Shift:
Step 5: Then go to Select > Modify > Contract:
Step 6: Set these options:
Step 7: Choose Bevel and Emboss:
Step 8: Choose Stroke:
Step 9: Select a good picture and put it in this frame:
You're done!
More Tutorials: 
