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I work in PSCS2, so hopefully these instructions will work for PS7.
I do it in 2 ways:
I have my photo on one layer and, using my elliptical marquee tool, I draw my circle on my photo layer. Then I invert my selection (I think it's CTRL+SHIFT+I; don't have PSCS2 open right now so I'm trying to remember) and hit delete.
I also do it another way - I have my photo on one layer. On the layer below it, using my elliptical shape tool, I draw out my shape (with "fill pixels" in my options selected in my options bar). Then, with my photo layer active, I just make a clipping mask (CTRL+ALT+G) which inserts the photo into the circle. This is a great way to do it, because you can still manipulate your photo within the circle.
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Andy
MY GALLERY
(avatar photo from stock.xchng)
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