Open the photo you want to use. I am using the photo below:
To create a circular text effect in Photoshop you must add the text to a path. To add text to a path, you first need a path. Photoshop gives you several ways to draw one.
The method you use to draw your path makes no difference. For this tutorial you will use the Ellipse shape tool .
Select the Ellipse tool. On the Ellipse options panel at the top of the document window select the paths option.
Draw Your Path with the Ellipse Tool by clicking inside your document and dragging out an elliptical path. Holding your Shift key down as you drag will force the path into a perfect circle. To draw the path out from its center rather than from a corner, hold down your Alt key as you drag. If you need to reposition the path as you're drawing it, hold down your spacebar, drag the path to a new location, then release your spacebar and continue dragging.
With your path drawn, you can now add your text. Select the Horizontal Type tool from the Tools panel .
With the Type Tool selected, choose your font settings from the Options Bar.
Move the Type Tool directly over the path. The cursor icon will change to an I-beam with a dotted wavy line through it.
Click anywhere along the path and begin adding your text. The spot you click on is where the text will begin, but don't worry if you've clicked on the wrong spot because you can easily move the text around on the path once you've added it. As you type, the text follows the direction of the path.
To reposition your text along the path, choose the Path Selection Tool from the Tools panel. Simply click on the circle with the Path Selection Tool and drag it the text further down the path until you have your text positioned the way you want it to appear.
Click the check mark at the top of the document to set your text.
Here is my finished product: