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.
Press (PC: Alt + Shift + [, Mac: Option + Shift + [). This selects the background layer. Next add a Channel Mixer adjustment layer by clicking on the Create new fill or adjustment layer button in the Layers Palette. Choose Channel Mixer from the list.
To help the snapshot stand out even more we can lighten the background picture. Use the Create new fill or adjustment layer button in the Layers Palette to create a new Levels Adjustment Layer. Lighten the image by increasing the black Output Level.