Step 1: Choose Your Photo
After you've settled on a photo, open it in Photoshop and do any basic image/spot correction that you want. This photo is too dark, so I am going to open up Image>Adjustments>Levels to lighten it.
Even if your photo has good lighting, open up Levels and play with the inputs a little bit. We want the photo to start looking more like a drawing with less realistic color. If you are using a drawing, you may skip this step if you feel it necessary. For my photos, I usually bump up the gray and white levels, but each photo you use will have a different result. Keep playing around until you find the right balance. If you go too far off, hit cancel and start over.
Depending on the photo or drawing, you might want to add a little bit of sepia color to give the photo more of an aged look. I am going to use a fill layer in this case. Layers>New Fill Layer>Solid Color. Change the Mode to Soft Light and click okay. Choose a fill color that looks best to you. Merge that layer down onto your photo after you are satisfied with the effect. Sometimes you can play with Levels enough that a sepia layer is unnecessary.
For photos with a lot of detail, you will want to add a Filter>Blur>Gaussian Blur to the photo.
Step 2: Creating a New File and Cutting Out Your Photo
Return to your prepared photo and cut out the image using the tool of your choice like the magic wand or magnetic lasso. Be sure to use the Refine Edge function to clean up your selection. Inverse the selection and copy it. Return to your new document and paste the selection. Even after refining the edge, your selection may have some floaty bits or things you don't want to include. I usually fine tune with the eraser tool. Use the Blur brush tool to make the edges of your selection less crisp or blur any details that stand out too much.
Step 3: Starting to Pull the Cover Together
Now this is the point where you can start to get really creative with your own photo, adding in other effects, shapes, other drawings, photo props, etc. as well as adding text to your cover.
Once you have some text established, we can start aging everything. You'll need to download or create your own aging/grunge brushes. Searching for Grunge or Distressed Brushes will give you a lot of options on how to make them or where to download (most of them are free to use for non-commercial work).
To install the brushes after download, open the Photoshop Folder in your computer library (it is usually inside an Adobe folder in the Applications area). Access the Presets folder. Drag the .abr file into the Brushes folder. You may have to save your work and restart Photoshop. Open the Brush Library and bring up the brushes you've downloaded or created.
To start distressing the cover, choose a color slightly lighter than what you want to distress. You might want to turn down the brush opacity, but you can really play around with it. For the red background, I had the opacity of the brush around 30%. To distress the text, you can use the same grunge brush with the eraser tool, just be sure you are set on your text, because you will need to raster it. You can also use this to distress the photo a little bit.
Step 4: Final Steps
When you are fairly satisfied with the cover, add a new layer filled with black and access the Filters menu. Use either the Texture>Grain or Sketch>Halftone Pattern filter to give the cover the final printed effect. Change the blending mode of the layer to overlay and turn down the opacity to your liking. Play around with what works best for your cover, every picture will be different.