Creating a Picture Box on a Picture in Photoshop

Magic Picture within a Picture

In Photoshop, open a file of your choice.

Use a Marquee tool and draw a selection somewhere on the image.

Create a Solid Color Layer Mask above the background layer and fill the selection with grey.

Change this layer’s blending mode to Overlay.

Add a drop shadow to this selection by choosing Layer>Layer Style>Drop Shadow.

You can adjust the size to your preference.

Create a Hue Saturation Adjustment layer above this grey layer. Change the Saturation slider to 0 and the Lightness slider to around +10.

With this layer active, Control click the gray layer’s icon to bring up the selection on the Hue Saturation layer.

Change to the default colors and fill the selection with black.

Create a new layer at the top of the layer stack.

Control click the Color Fill layer’s icon.

Choose Edit>Stroke and then fiddle with the settings to get different effects. I’ve got 15 px and inside checked off with a near white color.

Now you can link the top 3 layers together and free transform them and/or move them around the image.
Link them by holding the Control key down as you click the layers you want to link.

This is the result: