By Cletus.

Open the image you want to work with. I'll be working with a portrait of Almost Willie.

Use the Rectangular Marquee tool (M) to make a selection that is the size and shape you want for the outside edge of your snapshot.

Use Select > Transform Selection to finalize the position of your snapshot. Here I have roated the selection slightly.

We're going to place the snapshot in a Layer Set. The first thing we want to do is create a new Layer Set. We do this by holding down the (PC: Alt, Mac: Option) key while we click on the New Layer Set button in the Layers Palette. When the New Layer Set Dialog opens, enter "Polaroid" for the name of the new layer set.

Now that we have our layer set we can start making the snapshot. The snapshot will be made up of two layers. One layer will hold the snapshot image, the other layer is the white backing of the snapshot. We'll make the white backing first.

To create a layer for the white backing, hold down the (PC: Alt, Mac: Option) key while clicking on the New Layer Button in the Layers Palette. When the New Layer dialog opens, enter "Backing" for the layer name.

At this point we have a selction that is the shape of our snapshot, and we have the layer that will hold the backing. All we need to do is fill our selection with white. The fist step is to switch to the default foreground and background colors by pressing the D key. Now we fill our selection with the current background color (white) by pressing (PC: Control Backspace, Mac: Command Delete).

Now we have the backing. It's now time to make the image. Our current selection matches the outline of the snapshot backing. The image will be smaller than the backing, so we need to shrink our selection. We can do this by using Select > Modify > Contract (16 pixels). Now we have a smaller selection we can use for the image on the snapshot. Let's add a little something to the image. The first step is to switch to quick mask mode by pressing Q.

Now that we're in quick mask mode we can use a filter to roughen up the edges of the snapshot image. I used Filter > Brush Strokes > Spatter (Spray Radius 10, Smoothness 5).

Press Q again to leave quick mask mode. We now have a selection that to define the edges of the snapshot image.

Ready for a bunch of keyboard short cuts???

At this point your layers palette should look like this. Here come the shortcuts!