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Here I’m going to create an effect which you will see on
countless brochures and on the back of your favorite movies in your home
collection (especially comedies).
Create a new document.

Now use the circular marquee tool and hold down the Shift key to
make a perfect circle. You’ll now want to create a blank new layer from the new
layer icon on the layers palette. Now choose a foreground color of your choice. We have to “fill” this layer with
something solid (like a color) for it be actual pixels on the layer. So here
I’ve chosen a bright cherry red. Now go ahead and “Fill” that circular selection
with red Alt/Opt Backspace or Edit: Fill).


Now drag in an image that you want to place into the circle
itself (it has to be at least as big if you want it to fill the whole inside).
Now go to Layer: Clipping Group (or Mask in CS) when you are on the top layer.
Creating a clipping mask will allow the selected layer to fit within the layer
beneath it (it “clips” the outside areas from view within the shape of the
bottom layer in the group).

You may have to modify the size of your image to make sure
that it fits within the circle we’ve created.

Now simply create a Stroke around the layer of the circle.
This provides the border/outline.
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