Firstly, you are going to need an interface or panel that you want to add your buttons to. You can use any interface image you already have handy, or you can make a new one similar to the the example by following the steps in the smooth metal tutorial.
Here is an example of what an inset is:
From the above image you can see that the inset is what adds realism and makes the button look like it’s meant to be there. Most buttons on mobile phones, stereos, and all kinds of electronic gadgets are inset into the surface, so that’s the effect this tutorial will help you emulate.
Start by creating a new layer above the layer that contains your interface. Set your foreground color to #c1c2c4. Now select the Ellipse tool (note this is the shape tool not the marquee selection tool)
Roughly where you want your button to appear, hold the Shift key and drag your circular shape until you have the size you want.
To give the button the chrome effect add the following layer styles. Begin by going to Layer » Layer Style » Inner Shadow.
Layer style settings
When you’ve completed this, you may want to save your layer style for later use (to do this, click New Style and choose a name. Then click Styles at the very top left of the layer styles box, and click on the arrow icon to the right… choose Save Styles from the list). Click OK when you’re done, and you should be left with a button similar to the one shown below.
So, you now have your button sitting on top of your interface, but it doesn’t look like it’s meant to be there. Time for the much-needed inset.
In your Layers palette click on the vector mask of the button you just created, as shown in the image below:
This makes the path active.
Now switch to your Paths palette:
Drag the Path layer of your button to the New Path icon to duplicate the Path layer. This will create a new path called Path 1.
Now choose the Path Direct Selection tool, right click inside your document anywhere and choose “Free Transform Path”
Holding Shift and Option (PC: Shift and Alt) together drag a corner to make the path slightly bigger than the button as shown below. When you’ve finished this, hit Enter.
The reason we are using paths in this instance is because they are much easier to resize without any loss of quality.
The next step is to create a new layer UNDERNEATH the layer with your button on it.
With the Path Direct Selection tool still active, right click anywhere in the document and choose “Create vector mask”. Now press X then D to reset your colors. Press Cmd+Backspace (PC: Ctrl+Backspace) to fill the path with white.
Now go to Layer » Layer Style » Gradient Overlay and enter these Gradient Overlay settings (or adjust them so it looks good to you).
Your image should now look something like the example below. Notice how the button now appears as if it is a part of the panel, instead of just sitting on top of the surface? Good job :)
Don’t stop there though. Continue to try this effect on buttons of any shape, size, or texture. You can even make screens or LCD displays look like they are inset into the interface. Try out the LCD Orbs and Glossy Buttons tutorials for some ideas you can apply for making great-looking LCD displays.
With a little effort, you can produce some almost photo-realistic stuff. If you make a lot of interfaces you’ll find that you use this technique quite often; not just for the buttons but for just about anything.