Start by opening Photoshop and creating a new RGB image. I used the dimensions of 550x150 in the example. Then create some text by using the Type Tool (keyboard shortcut T).

Next Ctrl+click (Mac: Cmd+click) on the text layer to select it. Then, create a new layer by clicking . Click and drag the new layer below the layer that your text is on. Go Select>Modify>Expand and choose the number of pixels that you want your outline to be. I chose 2 pixels in the example.

Now choose the color that you want your outline to be as the foreground color. Then hit Alt+Backspace (Option+Backspace) to fill the selection.

Right now you have a basic outline, but there are some more things you can do if you would like to enhance it a bit. For instance, outer glows or drop shadows are always nice with outlines. In the example, I added an outer glow, by using the Blending Options (a.k.a. Layer Effects in PS 5). To do this, hit Ctrl+D (Command+D) to deselect your selection and then go right click the layer you are currently on with your outline (in the Layers Palette) and choose Blending Options. To see the which settings I used, you can click the image to the left.

To further increase the coolness factor, you may want to add a gradient to your text. I did this by clicking the text layer in the Layers Palette and then creating a new layer. Next Ctrl+click (Command+click) the text layer to make it a selection and pick the Gradient Tool (it's hidden under the Paint Bucket Tool in PS 6+). Now you can either edit your own gradient or use one of the predefined gradients. In the example, I used a linear gradient . Click and drag to direction that you want the gradient to go.

One other popular outline effect is the floating outline. To do this, choose a large number of pixels when you expand your selection (in step 2). Then, Ctrl+click (Cmd+click) your text layer again and expand by a lower amount of pixels and hit delete (or fill it with another color if you want). Now your outline will be floating around your text in a groovy way.