Text Cutout

 

Start with a nice background, and using the text marquee tool create a text marquee. Nice big fat text is good. To select the text marquee tool click and hold on the text icon until the submenu pops up, then select the text marquee:

 

Now turn the selection into a channel, click on the channels tab and then the Create channel from selection button (no. 1). Now create a copy of the channel. To create a copy of the channel drag the channel to the new channel icon (no. 2):

Turn of the marquee selection by using Ctrl+D.

 

With the Alpha 2 channel selected (should be still selected from doing the copy), Click on Filter -> Blur and select Gaussian blur. Set a blur value of 0.5. Now select Filter -> Other and choose Offset. Set the offset values as 1 and 1 and select Repeat Edge:

 

Now we want to load the first channel as a selection. To do this we drag the channel to the load icon. Note: We want to keep the Alpha 2 Channel selected when we do this.

Press D to select the default colours (or click on the default colour selector) and then press Delete. Then do Ctrl+D to remove the selection.

Copy the first channel again as we did in step 2 (no. 2). So you should have an Alpha 3 channel which is a copy of Alpha 1.

Now with the new channel selected click on Filter -> Blur and select Gaussian blur, set a value of 2.5. Then click Filter -> Other and select Offset. Set the values as below:

Select Image -> Adjust and choose Invert, or do Ctrl+I:

Now load the first channel (while keeping the third channel selected, as we did in step 4). Click Select -> Inverse (or Ctrl+Shift+I), select the default colours (or press D) and then press Delete.

Use Ctrl+D to remove the selection.

Select the RGB channel and then click back to the layers tab. Create a new layer:

Go back to the channels tab and load the first layer (like we did in step 4). We want to fill this with 20% back. To do this we select the Bucket Fill tool (no. 1)  and make sure we have the default colours selected (D). Then set the fill options as shown:

Now fill the text to get the result below:

And as always use Ctrl+D to turn off the select. 

Now lets repeat the process with the third channel. Load the third channel and fill with 100% black. So leave the other fill settings as in step 7, but make sure the Opacity it set to 100% (press zero as the shortcut for this). Click anywhere on the image to fill the selection.

Lastly repeat the process again with the second channel. Load the second channel and will with 100% white, keep the other fill settings as in step 7. Use D to select the default colours and then X to switch then around to white becomes the fill colour. Click anywhere on the image to fill the selection. And that's it! Hopefully the result is something like:

Optionally if you don't want the background showing through, just load the first channel, then switch back to the layers tab and select the background layer, then press Delete. This will delete the background and leave whatever background colour you have selected. 

You can also skip the 20% fill in step 7 if you don't want the background to be darker.

Which actually looks a bit like a bevel depending on how you look at it. For example: