Okay, excuse me if I mess anything up here, but...ummm...beer. So yeah, feel free to mock me if I do. ;) The first thing to do is have both images you want to conform (in this case, the face to the tree) lined up one over the other (face over tree trunk). Second...duplicate the lower layer (in this case the tree trunk/layer) and turn it into grayscale (Image -> Mode -> Grayscale). Middle tones of gray provide no distortion at all, lighter tones add/raise the distortion (ie move the face layer "up/right", and darker tones lower it (ie, make it look as though it's sinking in). The most important thing to do in this step would be to make sure that everything outside the trunk was around 50% gray so it has no effect on the face layer at all (Levels/Curves can be a big help in evening this out). If anything doesn't seem quite even enough, you can paint those areas with the dodge and burn tools, or even select a neutral gray from the color palette to paint them in (much easier with a tablet than with a mouse, but still very doable). Some folks like using a blur to even things out, but I've found that to be much too general and kinda makes some parts of the image "swim" or not quite seem like they're conforming. Once you've got this done, save this layer (copy it into a new doc if need be) as something like map.psd or sourcefile.psd. Next, select the upper layer (in this case the face) and click Filter -> Distort -> Displace. You'll get a dialog box asking you how much you want to distort the image, I've found it's best to stay under 30% and above 15% to make things work smoothly, but others again have other opinions. ;) Hit ok, you'll be asked for a source file to use. Use the file you saved before (youre map.psd or sourcefile.psd). Sit back and watch your face layer wrap around your tree trunk layer...tis kinda funky. ;) FYI, after this point, if things again don't quite look right, try lowering the opacity of the displaced layer to make it follow the countours of the underlying layer better, and you may want to mess with the blending modes too for the same reason. If none of this makes it work properly, either ya messed up or I'm too trashed to explain myself properly. ;) +> T <+

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Thanks Thyrain,
you saved me some typing and trying to think of a way to explain it to the members. This may seem "crossed-posted" but i posted a link to John Paul Caponigro's web site (he's the author of the book; Adobe Photoshop Master Class), he has a good article that explains it well.

Thanks again for sharing,
see ya' around
:)
retrocity

Fantastic! Displacement mapping overload I will be giving this a go for sure.thanks :O)