What photoshop version are you using? Basically, you type out your text using the horizontal type tool, hold down the ctrl key and click your "text layer" and this should select all your letters. With the text selected click on the channels tab and hit that little button that saves selection as channel. Go back to the layers tab and you can remove everything there including your "text layer" just leave a transparent layer behind. Save it as you were.
If you're using version 7 make sure you get the targa plugin fix.
NOTE: Leave a small space at the top between your text and the image or you'll get an ugly effect.
Linear Mode
