This is something I figured out, or at least refined a bit, when I was just screwing around with Photoshop Elements for lack of anything better to do. It's a dead simple effect that may not be the most realistic, but is still good looking :D
Step 1: Create a New Document
This one is pretty simple. Make a new RGB document with a black background. I made mine a nice 500x500 px square, so keep in mind any size differences whilst using the effects.
Once you have your document, create a new layer. Using a small brush, draw some form of flame using red.
Step 2: Create the Second Layer
Duplicate the ugly red 'flame' (right click in the layers panel). Now select its outine (Ctrl+click in layers panel) and find your way up to "select>contract". Contract by 10-20 pixels, give or take your image size.
Now fill the selection with a deep orange using the paint bucket. Invert the selection (Shift+ctrl+I) and press delete to rid yourself of the red in the layer.
Repeat this process to create a yellow layer within the orange one.
Hopefully, you are left with one very nasty looking flame that appears to be cut from several layers of paper. Not to worry!! Easily remedied.
Step 3: Blur
I think the title says it all. Select the red layer, and go to Filters>Gaussian Blur. Select a radius from 10-20 pixels...but more or less depending on your image and preferences. You'll want the red to fade cleanly into the black, but you don't want it shrinking out of existance.
Move on to the orange. Do the same Filters>gaussian blur trick, but decrease the radius a little this time.
Moving on to the yellow, decrease the radius even more.
Hopefully, your flame looks slightly less atrocious now.
Step 4: Brighten Your Flame
So perhaps you're satisfied with what you've got so far. Well, you shouldn't be. Because there's more. I stumbled onto this while I was trying to add a blue layer behind the red, but no matter.
Duplicate all of the flame layers and merge the duplicates and the originals seperately. This ought to give you two perfect flames. Choose the one on top, and bring up the Hue/Saturation panel (Ctrl+U). Drag the top slider 'till the thing turns an odd shade of bluish purple. Move the slightly discolored layer to behind the original. Change the original's blending mode to "soft light" and merge the two. Duplicate twice. Change the middle layer to orange using Hue/saturation (click the "colorise" box), and the top to yellow. Set the blending mode of the top two layers to "color dodge". Copy all layers without the background, and paste. Now hit Ctrl+F to apply gaussian blur. Voila! your charmingly simple, somewhat realistic photoshop flame!