This text effect is used in many websites, signatures, and graphical work. Its a very important skill to know.
Step 1
Start out with an image you'd like in the text. I selected a random naruto anime image. Set your foreground color to white, and type the text you'd like (like above).
Step 2
Select the magic wand tool, and select the text like above.
Step 3
Now, select your background image layer, and press CTRL+C (to copy). Create a new document and paste your selection.
Final Product
(stroke)
(colorized/stroke)
(find edges)