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Open a new window, inserting either text or an image into it. Do not deselect.
Select image/special effects/cutout
Set the values to:
Select selections/ modify/ feather
Set Feather to 5
Select ok
Select image/special effects/cutout
Set the values to:
Select selections/ modify/ feather
Set Feather to 10
Select ok
Select image/special effects/cutout
Set the values to:
Deselect your selection and select the window again. Set the selection tool tolorance to 0. Invert the selection.
Select selections/ modify/ feather
Set Feather to 1
Select ok
Select image/special effects/cutout
Set the values to:
Save
That's your basics. Coming next: Adding the mask 
and inverting the image to create a cool variation.