Torn Paper

Finished project
  Choose a color for your paper.

Flood fill your image with whatever color or texture you want your background paper to be. Add a new layer for the torn or deckled paper, Layer-> New Raster Layer.

  
Painting the edge Create a new brush preset.

Set your foreground color to the color you want your deckled paper to be. Click on the paintbrush tool paint brush tool. In the preset drop down, hit the reset button Reset button. In the tool ribbon set the Size to something reasonable for the size of the image you're working on, I've set it to 30 here. Set Hardness to 70, Step to 5, and Thickness to 50. Now go to the Brush Variance palette, if this is not visible, View-> Palettes-> Brush Variance. Under Thickness set the Jitter to 50, under Rotation set the Setting to Oscillating Fade and the Jitter to 100. At the bottom of this palette, set the Position Jitter to 120. In the preset dropdown, hit the save button and give this preset a name so that you can use it again. On your image, drag the paintbrush to make the edge.

 See a screen capture of this step.
Fill in the paper Filli in the rest of the paper.

Click on the flood fill tool Flood Fill tool. In the tool ribbon set the Match Mode to Opacity and the Tolerance to 199. Click in the image to fill in either above or below the deckled line. You can add some noise to this or a texture if you like, here I've just added 10% Gaussian Monochrome Noise.

  
Modified selection Make a selection.

Click on the Magic Wand tool Magic Wand. Set the Match Mode to Opacity, Tolerance to about 70 and checkmark the anti-alias box. Click on the transparent part of this layer. Selections-> Modify-> Expand. Expand it by the number of pixels that you'd like the torn edge to be. Here, I've expanded by 13 pixels. Since paper almost never tears the exact amount from the edge all the way across, we will vary this somewhat. Selections-> Edit Selection. The selection turns into a red "lith" overlay. Click on the Warp Brush Warp Brush. Choose the Push mode of the Warp brush Push mode. Push the red lith around so that it is no longer perfectly even. Selections-> Edit Selection to go back to your regular selection mode.

  
First drop shadow Lighten the torn edge and add a drop shadow.

Adjust-> Brightness and Contrast-> Brightness/Contrast. The settings will depend upon your color, bring the lightness up and the contrast down. Here, I've used 11 and -4. Selections-> Invert. Effects-> 3D Effects-> Drop Shadow. Settings here will depend upon the color you used and the direction that the shadow will fall. Here, I've set the Offsets to -2, 0, Opacity to 20 and Blur to 6.

  
Second drop shadow Another drop shadow.

Selections-> Select None. Use the Magic Wand again to re-select the transparent part of the image. Selections-> Invert. Effects-> 3D Effects-> Drop Shadow. Again, this will depend upon your colors. Here, I've used Offsets of -4 and 0, Opacity 50 and Blur 10. Selections-> Select None. If you like, you can go back with the Warp Brush in Push or Noise modes and mess up the edge a little more. I used both modes here.