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Step 1: Shoot Frame
Take a shot of your subject holding the picture frame.
Step 2: Create New File
In Photoshop, open a new file. (File-New-Blank File...)
Open the properties window of your photo. (Right click on photo-Properties-Details tab)
Match the length, width, and DPI(resolution) of your photo to the new Photoshop file.
Place your photo into this file. (File-Place...-Select File-Commit)
Step 3: Adjust Levels(optional)
Tweak sharpness, exposure, and other settings with the dropdown menus. For example:
I increased the Brightness to 85 and the Contrast to 35 .
Step 4: Remove Inner Frame
Use the Magnetic Lasso or Polygon Lasso tool to cut out and delete the inside of the picture frame.
Step 5: Duplicate Layer
Make a copy of your current layer. (Layer-Duplicate-OK)
In the Layers window, drag the copy layer below the original layer.
Resize and rotate the copy layer to fit within the original picture frame. Use the copy layer's handles to manipulate it.
Commit the new layer position.
Step 6: Duplicate All Layers
(Ctrl+Click all layers-Layer-Duplicate-OK)
Drag these copied layers to the bottom of the layer stack. (This puts them underneath all other layers.)
Resize these layers to fit in the previous frame.
Step 7: Repeat
Keep duplicating layers until the resolution degrades to nothing. That's all there is to it!
Step 8: Export
Now you'll want to get your image out of Photoshop and into a regular file.
Export the entire image as a JPEG, PNG, or any other desired file. (File-Save As...-Save-Maximum Quality-OK)
This instructable is also archived on my blog .
If you try out this technique, be sure to post your image in the comments!