Step One
First of all, download the texture shown to the left, or use your own, this was just a texture that I downloaded a few months ago.
Now, open it, and press ctrl+a, ctrl+c, ctrl+n, ctrl+v and you will have taken the .gif texture, and pasted it into a .psd file, which should be the same size (Photoshop 7 does this automatically, if not create the new document’s width 250px and height 150px) and we now have a .psd with the texture shown on it (on a new layer).
Step Two
Next, select the Horizontal Type Mask Tool, as shown to the left. Now type your text, I’m typing Infinite-Fire with the Agency FB font, size 60pt.
Step Three
Now because we used the Type Mask Tool, we have a selection instead of a text layer, so create a new layer (layer–new–layer), and fill this selection with white and then change the fill opacity to 0%.
Step Four
The image to the left shows our layer structure.
Step Five
Now, we simply apply some layer styles to the layer with the text on (Layer 2 for me), as follows:
Inner Shadow Settings
Blend Mode: Multiply
Color: Black (#000000)
Opacity: 45%
Angle: 120
Distance: 5
Choke: 0
Size: 5
Noise: 0
Step Six
Bevel and Emboss
Style: Outer Bevel
Technique: Smooth
Depth: 100
Direction: Down
Size: 2
Soften: 0
Angle: 131
Altitude: 28
Highlight Mode: Color Dodge, White, 100% opacity
Shadow Mode: Multiply, Black, 0% opacity
Conclusion
And here is our result! The text looks like it is inset, with the light source coming from the top left.
