The original text is written by Sue Chastain of About. When reprinting, please be sure to indicate the author of the original text.
Photoshop CS2 adds a new transformation type called "Warp" in the "Edit > Transform" menu. Using the new Transform command you can transform layers into a variety of preset shapes, or drag and drop images with custom options.
All of this works within the document window, so you don't need to learn new dialog boxes like the Liquify command. The transformation options are pretty much the same as you'd find in the type tool - Scallop, Arch, Convex, Shell, Flag, Fish, Wave, Increase, Fisheye, Inflate, Squeeze and Twist.
1.Photoshop CS2 deformation conversion
New Transform>Warp command in Photoshop CS2
2. Deformed and curved flag
In this image, I used the flag preset and only adjusted the bend amount, so the effect isn't too dramatic.
3.Deformation-expansion and custom deformation
In this example I started with the Inflate preset and then switched to Custom, pulling the control handles in the deformation mesh to further exaggerate the deformation effect.
4. Complete the deformation conversion
When you commit the transformation, the grid lines disappear and you can see my deformed face on the balloon.
5. Transform layers to adapt to shapes
In Adobe's example, you can see how the layer is deformed and bent to fit the can. Layer masks and Multiply blending modes even make transformations appear smoother and more seamless.