Step1. Open a new document of any size and create your background. I went with this one that I made using my cloud grunge tutorial:

Step2. Open up the image you want, it needs to be a pre-cut-out render of an image like this:

Step3. Using the move tool on your control panel move your image from its place onto your background and resize if needed now you will have something that looks like this:

Step4. Duplicate the layer.
Step5. Select the smudge tool from your control panel. (you may have to click and drag out to find it.) Its here:

Settings: Mode-Normal, Strength-50%
(can be found at the top of the screen once Smudge tool is selected)
Step6. On the bottom of the two image layers you need to use the smudge tool and go around all the edges pulling them outwards. You should now have something like this:

Step7. With the upper layer now selected you need to press this button

on the layer menu to apply a mask to the layer.
Step8. You need to make sure your foreground and background colours are black and white, to do this press ‘D’
Step9. Now select a soft round brush, I used one at size 27, make sure your foreground colour is black and on the mask gently go around all the edges of your image to make them not so sharp, it should look like this:

You can see I left the fingers out of the mask, you can do this with certain images you give them a sense of depth, almost like the hand is further forward than the rest of the image.
Step10. Set one of the colours in the background as your foreground colour, then with the top image layer selected press,
CTRL+U then tick colourize and press ok
Repeat this process with the second image layer as well. It should look something like this by now:

Step11. This is the final step. Select the image layer you did the smudging on, it should be the bottom of the two images and then select the eraser tool. With a brush of your choosing (a grunge brush looks best) delete small areas around the edge’s and some even smaller parts within the image.
If done nicely you should end up with something like this (this has some finishing touches to it):

If you have any problems please don’t hesitate to contact me at Steven_brennon@hotmail.com or PM me through these forums, I hope this helps.