Photo Effects: Create A Photo Within A Photo
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Step 5: Add A White Stroke To The Vector Shape To Create The Border Of The Smaller Photo
Make sure the "Clipping Mask" layer is still selected in the Layers palette (selected layers are highlighted in blue), then click on the Layer Styles icon at the bottom of the palette and select Stroke from the list of layer styles that appears:
This brings up the rather massive Layer Style dialog box set to the Stroke options in the middle column:
There's three options we want to change here, and I've circled them in red in the screenshot above. I've set my Stroke Size to 12px to create a standard photo border around my smaller photo. Depending on the size of the photo you're working with, you may find that a different value works better. Below that, make sure Position is set to Inside. This means our stroke will appear inside the boundaries of the shape. By default, Position is set to "Outside", which causes the corners of the stroke to appear rounded. We want our corners nice and sharp, and "Inside" does that for us. Finally, by default, Photoshop sets the stroke color to red, which makes absolutely no sense, and obviously we don't want a red border around our image, so change the stroke Color to white by clicking on the color swatch and selecting white from Photoshop's Color Picker.
Here's what my image looks like so far with the 12px white stroke applied:
Don't exit out of the Layer Style dialog box just yet. We have one more layer style to apply.
Step 6: Apply A Drop Shadow
With the Layer Style dialog box still open, click on the very first layer style at the top of the list on the left, Drop Shadow. Make sure you click directly on the words "Drop Shadow" and don't simply click inside the check box to the left of them. We want to bring up the options for the drop shadow effect, and you need to click directly on the words themselves for that.
This changes the options in the middle column of the the Layer Style dialog box from the Stroke options to the Drop Shadow options. Lower the Opacity of the drop shadow to around 50% so it doesn't appear so dark, then change the Angle of the shadow to 130°. Finally, set the Distance to around 10 pixels, although you may need to increase this amount if you're using a larger image than the one I'm using:
Here's my image now with both the white stroke and the drop shadow applied:

Step 7: Use 'Free Transform' To Rotate And/Or Resize The Shape As Needed
If you need to rotate, resize or reposition your vector shape at this point, make sure the shape layer is selected in the Layers palette, then use the keyboard shortcut Ctrl+T (Win) / Command+T (Mac) to bring up Photoshop's Free Transform box and handles around the smaller photo.
To move the shape, click anywhere inside the Free Transform box and drag the shape to a new location, or use the arrow keys on your keyboard to nudge it. To resize the shape, click and drag any of the Free Transform handles. To simply make the shape larger or smaller while keeping the same proportions for width and height, hold down the Shift key as you drag any of the corner handles. Holding down Alt (Win) / Option (Mac) as you drag will cause the shape to resize from the center rather than from the side or corner opposite from where you're dragging. Finally, to rotate the shape, click and drag your mouse anywhere outside of the Free Transform box:
Press Enter (Win) / Return (Mac) when you're done to accept the transformation. Rotating the shape adds a bit more excitement to the image. I've also made slight changes to the size and position of my shape. And with that, our smaller cropped photo around the subject is now complete! We'll finish the effect off by colorizing and blurring the original image in the background next.
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