The first thing we're going to do is get a basic outline for the cloth. After we've done that we can add layers to detail it further.

• Create a new RGB image, 500 x 500 pixels in size.

Before we start adding layers, let's change the background colour so that you can see the results of other editing better.

• Set the Foreground colour to white and the Background colour to a slightly off white (Red, Green, and Blue of 202).
• Select the Background layer.
• Select the Gradient tool and set its type to Radial Gradient.
• Click and drag from a point around the top left corner of the image and drag to a point around the bottom right corner.

This should give you a nice, subtle background we can build on. Now it's time to create the base for the cloth.

• Add a new layer.
• On the new layer, select a rectangle about 290 x 290 in size at the centre of the image (ours was 293 x 285, you don't need to be too precise).

This rectangle will be the basis for our cloth.

• Set the Foreground colour to Red 255, Green 255, Blue 249. This colour is slightly off white, good for creating the first hint of age to the cloth.
• Select Edit > Fill and fill the selection with the Foreground colour.

[ Speed Tip: If you have the Marquee tool selected, you can get to the 'Fill' command from the right click menu]

You've now got a roughly square rectangle that's slightly off white. We're going to use this as a basis for the cloth and some of the detailing. Because we're going to use it for more than one effect, we want to make sure we have a copy of the selected area for use later.

• If you have deselected the rectangle already, re-select it by Ctrl/Cmd Clicking the layer.
• Save the selection by selecting Select > Save Selection...

We've now got a copy of the selection that we can use whenever we want. Before we apply the folds to the cloth, let's add some text to it.

• Add a new layer above the rectangle layer.
• Set the Foreground colour to a dark brown (Red 82, Green 56, Blue 2).
• On the new layer enter some text, the words 'Old Cloth' work well, in any font you like.
• Position the text with the Move tool over the rectangle of cloth, somewhere in the top middle region.
• Set the opacity of this layer to 50%.
• Merge this layer down on to the rectangle layer.

[ Speed Tip: To quickly set the opacity of a layer when the Move or Marquee tool is selected, press the numbers on the numeric keypad of your keyboard, 1 for 10%, 3 for 30% etc.]

We've now got text on our rectangle that will distort when we fold the cloth.