This technique can be used as a basis for various types of fabrics or scaly textures. It's also great for making close ups of flags. Through this tutorial, you will learn to use different filters such as the liquify filter, as well as practice with different blending modes.
Open up a good sized document in Photoshop (500x500 or bigger). Fill it with 90% Grey from the color palette, then go to Filter > Texture > Texturizer. Here you can play with the settings depending on how you want the fabric to look, I went with:
Light: Top Left
You can change the intensity of the specular highlights in the fabric by adding a "sharpen filter." Go to Filter > Sharpen > Sharpen. You can sharpen it as many times as you like. For this image I sharpened twice, then immediately used the "Fade" (edit > Fade) command and faded the second sharpen by 50%
Next, go to Filter > Liquify. Here we will add bend to the fabric to create a wavy effect. Depending on your taste,play with the settings to get as soft or as hard of a bend as you want. I used the "Forward Warp Tool" (default), with a large brush size, 50% brush pressure and 20% brush density.
*Tip: Use the liquify filter on family photos to create some funny effects!
If you make drastic changes, the filter can blur out/pixelate your texture. If that's the case, apply another sharpen filter and fade to your liking.
Now we'll add the dark spots to emphasize the bend. First create a new layer. Pick the brush tool then open up your brushes panel (window > brushes), and adjust the settings so that the brush covers most of the part that you want to emphasize. With your foreground color set to "Black," paint in the dark areas. You can always adjust the opacity of the layer to lessen the emphasis of the dark areas. In my case, I lowered the opacity of the layer to 95%.
Now to add in the text. With white as your foreground color, type in whatever pleases you, then set that layer's blend mode to "overlay." Immediately afterwards, duplicate the text layer (layer > duplicate layer) as many times as you want to get the desired effect. In my case, I duplicated the text layer twice (three text layers in all). This simulates a screen print effect.
Also, remember to play around with the opacity of the shadow layer. I ended up lowering my opacity even more to help bring out the text.
I hope you can put this tutorial to good use.