How do you edit/transform skew or distort an image or a selection without loosing much resolution. It seems that when I skew or distort something it becomes too pixelated. Is there a way to reduce that?

For the most part, that's life in the digital lane. Well, as far as I know. If you change the size much, it's gonna happen. If all you're doing is just skew (etc.) and don't change size must, then any pixalation might be due to the image being on the low-res side of things to begin with. IF there are some things that can be done to help, I'd like to know, too. :-)

One way you can do it (but does not work that well) is click on the move tool and hit CTRL T, then hold down the shift and CTRL key. This method does not help to be precise, but the image quality seems to not change much. Alternatively when using the transform you can hold the CTRL key, but you will loose detail. One thing to note is that you should always work with bigger images. You can always make it smaller if it is too big and not loose quality, but resizing a small image to be larger is a big no because quality will always be lost. -LeFrog

Holding shift just constrains the transform.
Basically there is no way to stop losing the pics resolution. Especially with the distort transform.

As ChuckEvans and LeFrog said start big and reduce the image last(if you can) and don't reduce smaller than you want and then enlarge again.

And try to transform as little as possible. Less is more.

Quoted from the Photoshop help files
"When transforming a bitmap image (versus a shape or path), it becomes slightly less sharp each time you commit a transformation; therefore, performing multiple commands before applying the cumulative transformation is preferable to applying each transformation separately."

IF you're not substantially changing the size of the image, it shouldn't pixilate. However, photoshop uses an image in virtual memory while the transform is taking place, in order to use less actual memory, so your image will appear pixilated until you actually apply the transform. To use transform most effectively, however, it's always better to start out with an image that's larger than it will be once transformed. For example, if you want to transform text, and you need the text to be, say, 76pts once the transform is applied, apply the text at, say, 200 pts, and use the transform to shrink it down. If you're compositing a picture, and need to transform it, start out with a picture double the size you need. This has definite advantages in that downsizing always makes images look sharper.

I have been using a larger image than the one I want to transform to. However still seems to pixelate after transformatiom. Maybe the best way is to reduce the image size to slighly larger than the final transformed one, then transform it. What is the best way to reduce image size so as not to loose much resolution in this case? Thanks

Try converting all your images to bitmaps or tiffs before you do anything. Better format for retaining quality. Jpegs lose quality just by being made into jpegs. Convert them to bitmaps ot tiffs and they should retain at least a good quality.

I think it has to do with the interpolation method. Every time you transform a selected area it has to interpolate some pixels to redraw the new image as a result you loose some information. The question is which is the best interpolation method for transforming selections.

You decide what method to use based on what you want to do with the image. There's no point choosing to skew if you actually want to distort the image. The only way to use different interpolation methods in Photoshop is when resampling images. Did you have something specific in mind?

Resampling refers to changing the pixel dimensions (and therefore display size) of an image. When you downsample (or decrease the number of pixels), information is deleted from the image. When you resample up (or increase the number of pixels), new pixels are added based on color values of existing pixels. You specify an interpolation method to determine how pixels are added or deleted. Applying the Unsharp Mask filter to a resampled image can help refocus the image's details. When an image is resampled, an interpolation method is used to assign color values to any new pixels it creates, based on the color values of existing pixels in the image. The more sophisticated the method, the more quality and detail from the original image are preserved. Which resampling method bicubic or bilinear gives better results for transforming images though?

I use bicubic, seems to be slightly better, though I don't often resample up.

Quoted from the Photoshop help files Bilinear for a medium-quality method. Bicubic for the slow but more precise method, resulting in the smoothest tonal gradations. Bicubic Smoother when you're enlarging images. Bicubic Sharper for reducing the size of an image. This method maintains the detail in a resampled image. It may, however, over-sharpen some areas of an image. In this case, try using Bicubic.