Step 1: Create a brand new document of a suitable size with a single background layer filled solidly with white, and add your picture/text as a layer above the background. Using either the eraser tool or Vector Masking, remove all 'white space' around your object so that it is isolated in its own layer, and the background layer shows from behind.

Step 2: Press and hold CTRL on your keyboard whilst clicking on your object layer to form a selection around your image. You can now let go of CTRL, but keep the selection active.

Step 3: Select the channels palette by clicking on its tab as shown in the picture opposite. Create a new channel by clicking once on the 'new channel' button at the bottom of the channels palette. You can call this new channel anything you like, but default names are normally pretty self-explanatory. In the new channel, Edit > Fill the selection with pure white and then Select > Deselect.

Step 4: Go to Filter > Blur > Gaussian Blur and enter in a value appropriate to the kind of effect you want to create. If you are aiming for a large subtle fadeout choose a large value but, if you desire a sharper effect, keep the value small. Experimentation is the key.

Step 5: Go to Filter > Pixellate > Colour Halftone and set the max radius to 10. This number relates to the overall size of the biggest dots, and can be varied to taste. Your channel should now resemble the image opposite.

Step 6: Press and hold CTRL and click the channel to form a new selection. You will notice that only your dots are selected.  Now go back to your layers palette by clicking on the layers tab, select the white background layer, and Edit > Fill your selection with a funky colour of your choice. This effect may not be amazingly versatile, but it does lend itself to rather funky implementations of layer effects. Just play around and see what you can create - you may surprise yourself!