Type your text using the color you prefer. The font used in this tutorial is called DomCasual BT… some other fonts that may work well include (but are not limited to) Arial Rounded MT Bold, Challenge Extra Bold, Comic Sans MS, and GoodDogPlain. Choose Layer » Rasterize » Type, then hold Command (PC: Control) and click on the layer to get a selection around the text.
Now, make a new layer above the the one with your text. Go to Select » Modify » Contract and choose a setting of about 5 (this may vary depending on the size and “fatness” of the font you are using). Choose a lighter shade of your text’s color and press Option+Delete (PC: Alt+Delete) to fill the selection. Press Cmd+D (PC: Ctrl+D) to deselect.
Next, go to Filter » Blur » Gaussian Blur and choose a setting of about 2.0 (again, this will vary depending on the size/fatness of your font).
Now that we have the basics out of the way, it’s time to add some nifty Layer Styles to pull everything together. Select the original text layer and choose Layer » Layer Style » Bevel and Emboss. In the Bevel and Emboss menu, use the following settings, or if you prefer, click to view the Bevel and Emboss settings.
Style: Inner Bevel
Use Global: unchecked
Gloss Contour: Rolling Slope
Highlight: Screen with 100%
Shadow: Multiply with 100%
Once you have those settings entered, simply select the Drop Shadow and Inner Shadow layer style options, leaving them with default settings (or of course you can play with the settings to achieve the effect you are looking for).
You now have some very cool looking “Gel Text”.