In this tutorial we'll talk about displacement map and textures in Adobe Photoshop. The main goal of this filter is to warp and distort images moving its pixels according with a pattern named displacement map. It works very simple, in some masking way, black and white being the basics of of displacement map. Pixels are moved to right and/or down by the black color, and white moves pixels up and/or left. Shadows of gray will distort image accordingly, and equal distribution black/white (mid gray) will have no effect. Once you understand this concept it will be easy to predict the effect of this filter on some targeted image. One word about targeted image: the filter works best with text and/or simple artwork, because warping and distorsion effect will not be overlapped on a complicated structure. So here are the steps:

Step 1. I decided not to take the usual grained shadowed texture, but try something else, and see what kind of effect I get; so I picked a landscape image



Step 2. Now is time to build the displacement map. As I said before we'll think in terms of black and white so we can do one of the following:

duplicate layer background
Layer->Duplicate layer, then with new layer selected do:
Image->Adjustment->Desaturate; you may increase contrast a little bit, remember displacement amount is direct proportional with the quantity of black and white from map.

Select All the grayed layer, then Edit->Copy then File->New->Paste
Here is the result:

Save this new file as 'displacement.psd' close window, and go back to the old file; make grayed layer invisible, or just delete it; use text tool and write down with big letters a word in a new text layer; I pick word "LANDSCAPE" with white letters. Here it is:

Rasterize the text layer.

Step 3. Now with text layer selected do:
Filter->Distort->Displace, with default parameters: horizontal scale:10, vertical scale:10, Stretch to Fit and Wrap Around selected. When asked select the earlier file 'displacement.psd' as displacement map for our text.
Here is a snapshot:

Step 4. Now I've got the distort effect over text. It seems like text gains some 3D effect curving out the space between rocks ! We can go a little further, giving some black inner shadow, and overlay blending mode with 70-90% level transparency or duplicating level and trying different blending mode effects.
Here is the final image:

That's all friends, have fun !