Create a new image in Photoshop by using: File/New. Make sure you give yourself tons of room; I used 400 x400. Then make the background black and add some text to the center of your picture. I found a font that came right out of Diablo, but any font will work. I also spaced out the letters to make more room in between each one.
Now make a few copies of this layer by right clicking and hitting duplicate layer. I made 3 copies. Leave one copy alone and rasterize the other 2 by right clicking and pressing Rasterize. Next, select all, the easiest way is to ctrl-click the layer. Then go under Select/Expand and set it to 5 pixels. Fill the selected area with a gradient, if you do not know how to do this check this tutorial.
Now this is where you get to be a little creative. Use Filter/Liquify and set your brush size to 7 pixels and brush density to 100%. Now just go around the outside of each letter making peaks. Be creative and just go crazy with it. My picture is below, but it will be different every time.
Now take one of the text layers and color it black. Then drag the layers into the proper order so you get an image like the one below.
I made a signature for one of my friends using this technique and it looks really cool with a fire type background. Check out the image below.
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