1. Setting the background
For this photoshop tutorial I am using a grungy paper background, which you can download for free at http://www.bittbox.com/freebies/free-high-res-grungy-paper-textures/If you are looking in creating the exact same result then you should leave the document at it's original size (684x1024).
2. Drawing the iPod shape in Photoshop
In order to get the proper dimensions, I am using a blueprint of an iPod. I've downloaded a medium sized image:
Import the image to Photoshop (File-Place) and reduce it's transparency so you'll be able to see both the background and the image:


Create a new layer and select the rounded rectangle tool (U), setting a corner radius of 20 px:
Draw a shape above the iPod image:

If you're happy with your result you may rasterize the layer:

Hide the layer so we'll draw the screen. Create a new layer and draw a shape using the rectangular marquee tool, this time with a corner radius of 7 px:

Create a new layer and draw the touch wheel using the elliptical marquee tool (M). In order to fit the selection perfectly, put the mouse cursor in the middle of the touch wheel and holding down Shift+Alt drag the mouse slowly to exterior:

Press Ctrl+Backspace to fill the selection when you're happy with your result. Draw a selection of the smaller wheel and press delete on the same layer:

You may hide the iPod image layer and unhide the iPod shape layer. Right-Click this layer and select Blending Options. Use the following settings:


Select the screen layer and apply these settings:

The setting for the touch wheel:

This is my result:

We'll add a reflection to the screen using the gradient tool (G). Create a new layer, select the polygonal lasso tool (L) and draw a shape like mine:

Select the gradient tool and use the following settings:

Draw a gradient from top to bottom holding down the shift key:

Ctrl+Click the screen layer thumbnail to get its selection, press Ctrl+Shift+I to select inverse, select the gradient layer and press delete. Ctrl+D to deselect. Reduce the opacity to 32% and set the blending mode to Soft Light:

The result:

3.Using the brushes
I've downloaded some brushes at http://browse.deviantart.com/resources/applications/psbrushes/Create a new layer and draw some shapes above the iPod. Set the blending mode to Soft Light:

Ctrl+Click the screen layer thumbnail and press delete. Repeat the step for the touch wheel. Ctrl+Click the iPod shape layer, press Ctrl+Shift+I and the apply a Gaussian Blur (Filter-Blur-Gaussian Blur):

You may create a layer below the iPod layer and play with as many brushes as you can. You may also use different colors:
I've added an Outer Glow to the iPod shape:
This is my final result, click the image for the full size:
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