Well, I started out with a high res version of this image...
http://www.liquidlibrary.com/CREATAS/COMPS1/EC/7110107/017H0701EC.JPG
I color corrected the image and cut out several of the nails from it and placed them in seperate layers. I used the eraser tool to give each nail a nice feathered edge, then used the "darken" layer property on them so they'll blend in with whatever they were on top of.
Then I did two parchment backgrounds in Photoshop. I did these by using the filter/render/clouds in shades of yellow and brown, then passing a texture over it. I blurred the parchment layer and did some touch up work on each one to make them look right. For my third parchment, I used this parchment from Map-A-Week, (the bottom one):
http://www.wizards.com/dnd/article.asp?x=dnd/mw/mw20010301x
The next step was to come up with all the text (which I had done while doing my DM's write-up of Phlan), finding fonts, etc. I used the lasso tool to cut out notes from the parchment layers. I ran a very slight "bevel & emboss" and "drop shadow" layer effects on the notes. I changed the color on each note to give them variety, then use the burn tool to make shadows (hoping to give them a more realistic 3-D look).
Once I had the text on the note I rendered the text. I made the rendered text-layer semi-transparent (ussually 60-70%) and blur it slightly (or streak it as needed) to get rid of the sharp edges.
The last step was to put the nails on all the notes, and that is more or less it. I'm assuming most of this doesn't make much sense though, unless you know Photoshop well, lol.
Hope that helps and I'm very glad to hear you guys liked it. It's great to hear some feedback on this

.