Displacement Masking is one of those things that sounds hard but when you go thru the steps you realize it really is not a big deal, but it can make some really cool effects. Here is the process I used to generate this chop. Sorry for the large quantity of pics, but there are a number of small steps.
I started with this source picture of the beautiful Angelina
To create a displacement map for her face I toggled to the channels tab and duplicated the channel that had the best contrast range (in this image the RED worked) Click the New tab and you can create a new image containing just the duplicated Red Channel.
Working on the new file we created - I first used the brightness and contrast tool to increase the contrast 100% (not shown) and then I added a slight Gaussian Blur to the image as shown.
Important - Save the new file we created as a .PSD file so you don't loose the information. I called this the AJ-DisplacementMap.PSD and saved it to my working directory.
Close the AJ-DisplacementMap.PSD file and you should still have the original source file open. Working in the original file, I placed the image of the fabric that I want to apply the displacement map. It is located on a layer just above the original photo. Go to the FILTER menu and select DISTORT and the DISPLACE and you should see this Dialog Box.
Click OK and you will be asked for a file to use as a Displacement Map. We choose our AJ-DisplacementMask.PSD file.
The result will look something like this.
I changed the fabric layer's blend mode to Overlay (some images may work better with different blend modes - experiment).
Now I want to mask. I turn Off the Fabric Layer and toggle to the Channel Menu. I duplicate the Channel with the most contrast between background and the subject and then lowered the Brightness and increased the Contrast.
I then used the BURN tool set to SHADOWS and a large soft brush to convert the mask to black and white and omit all the detail on the face.
I used a black brush to paint out the whites of the eyes and any stubborn highlights on the face and converted the mask to a selection. (Control Click on the layer or pick the selection tool at the bottom of the layer menu)
You will need to inverse the selection. I then changed to the layer menu and selected the Fabric layer and with the inverted selection active, I picked the layer mask tool on the bottom of the layer menu and the selection became a mask to hide the background.
Here is one of the great things about working with masks. Since I now realized that I want her eyes to be masked I go back to the layer mask and paint white over the eyes and other areas till I am satisfied the fabric only appears where I want it to be. I can add and subtract from the mask without damaging the original or the displacement map.
The final result
