First, we start of with a plain black background and a text layer.
Next, we want to Rasterize the text layer so we can modify it. Right-click the text layer and choose Rasterize Type or Rasterize Layer. Next, goto Filter > Stylize > Wind, and choose Wind, From the Left. Once applied, press Ctrl+F to repeat. Then goto Filter > Stylize > Wind again and choose From the Right. Press Ctrl+F to repeat. You should have something like this:
Now we want to do the same to the top and bottom, so we will go Image > Rotate Canvas > 90° CW. Then we will repeat the above steps, both Left and Right. You should have something like the following:
Now we can flip our canvas back (Image > Rotate Canvas > 90° CCW) and then apply a Gaussian Blur (Filter > Blur > Gaussian Blur) of between 1 and 3, depending upon the size of your image. I used 2.0 for this example. Then goto Filter > Distort > Ripple and choose 100%, Medium. Or more if your image is large enough.
Next, we will add some color. Goto Image > Mode > Grayscale, and Flatten or Merge if it asks. Then goto Image > Mode > Indexed Color, and Flatten if it asks you to. Then goto Image > Mode > Color Table, and choose Black Body. This should give us something like this:
Finally, goto Image > Mode > RGB Color and add a new text layer, the same as the original. Then line it up with the flames, and perhaps change the color:
You may want to change the text slightly by doing the following. Goto the Layer Styles of the Text Layer by double-clicking it and choose Inner Glow. Set the color as the bright yellow of the flames. I also added the following gradient as a Gradient Overlay.
This is the outcome of this tutorial, nice flame-engulfed text.
