We've all seen the pics where a flat image of a flag or face is mapped around an object like a brick wall, cloth, or wood planks, so it looks like is actually around the object. Like this map around a blanket . Well, how do day do dat?  Normally, it's done by using a displacement map.  What's a displacement map, you ask?

  Displacement maps are grayscale images in psd format, whose brighness values are used to displace pixels in another image based on a set formula. The brightness values effect the image this way:
  Medium Gray (50%)... does not effect the selected image.
  Medium Gray to Black... each step value decrease in brightness moves the pixels in the selected image down and/or right a distance prescribed by you in the distort filter dialog box. Black is max movement.
  Medium Gray to White... each step value increase in brightness moves the pixels in the selected image up and/or left a distance prescribed by you in the distort filter dialog box. White is max movement.

  The dmap can only have one layer but can have more than one channel. If more than one channel the first determines horizontal displacement the second vertical. All others channels are ignored.
  The dmap can be smaller than the image or larger and can be made to fit the image or tiled to fit the image.
  It's usually a good idea to apply a small amount of gaussian blur to the dmap so that PS doesn't spend time trying to map each little variation in the dmap.

  For demo here our dmap is a photo I took of our blanket converted to grayscale image the same size as the target image, 800x600 and has 1pixel of gaussian blur filer applied.

Here's the two pics I used: Flower image for target   Blanket image for dmap

Open target image and select layer you want to displace.
Select Filter-->Distort-->Displace, a dialog box opens. (fig 1)
Setup dialog box as follows...
Enter 10 for both horizontal and vertical scale values.
Check Shrink To Fit.
Check Repeat Edge Pixels.
Select ok, new dialog box opens. (fig 2)
browse to where dmap grayscale psd is stored and select it.
Image should appear slightly smeared in the general shape of dmap like this.

Now we need to overlay the image with the dmap.
Open dmap psd file in separate window.
Select it and Ctrl-A to select all and  Ctrl-C to copy, or drag it's layer over and drop on target window.
Select target image and Ctrl-V to paste dmap to new layer, not needed if you did drag and drop.
Select grayscale dmap layer on target image and change blend mode from normal to hard light and set it's layer opacity to about 65-75%. (fig 3)
Ta da.
Final result!

  This is just to get you started.  You can increase the H/V scale values for more dramatic effect or only use one, Use the levels on the grayscale dmap to control whether it displaces the dark or the light areas. You can use a photo for the source of dmap or use the filters in PS like the cloud filter. Use your imagination and have fun. If you make something intresting post it so we can enjoy it too.

  As always, this probably has mistakes and/or could be improved. If anyone has suggestions or corrections feel free to add them cause I want to learn too. I did it on the quick but I don't think I left anything major out.

We've talked about other ways of converting to b/w but this one, to me, is probably the best, at least the most adjustable. When PS converts an rgb color photo to grayscale it takes the red, green and blue channels and mixes them in different proportions.  These proportions are stored in software and are based on how the eye responds to color.  We can do it the same way but allow us to control what percentage of each channel is used.

Open the image you want to convert. You should have the layers pallete open if not select Windows-->Layers or hit F7. Should have something like this Figure 1

In layer palette, select background layer and hit <Ctrl-J> to copy current layer to new layer, or drag background layer to new layer icon at bottom of layer palette. Figure 2  You can bypass this step and work on the background layer but I'm used to versions that didn't have adjustment layers and like to keep a virgin down there.

Select new layer, if not already selected or background layer if using it.  Click on half-light half-dark circle at bottom of layer window to open Create fill/adjustment layer menu select Channel Mixer option, or select Layer-->New Adjustment Layer-->Channel mixer. Figure 3

The channel mixer window will normally come up with blue set at 100%. Check the monochrome button and also the preview button.  Adjust values for individual red, green, & blue channels... good start is 45,60,15 respectively. Find a set of values that get the desired result and click ok to save the adjustment layer.  The constant slider lightens and darkens. Figure 4  

If desired, before closing channel mixer you can save the parameters for use next time, or save the generic start values and load them next time you open channel mixer.

You can also create another adjustment layer, a Hue/Saturation layer, and tint the b/w you just made.  Be sure to click the colorize button in the Hue/Sat window. Set the saturation level to about 10-15 for starts and play to your hearts content. Figure 5

You may have already known this technique, if so, sorry to take up your time, if not, then you have another thing to play with in CS2.

Just as Austinspacce said of sharpening...
There are a lot of different ways to convert color to b/w. One way which produces a different tonal feel than the more common RGB->Grayscale conversion is to use Lab color Mode. Lab color mode converts the image to a Lightness, a, and b, channels. The lightness channel is the value component of the image, a is the red-green component, b is the blue-yellow component. What we do is keep the lightness channel and delete both color channels. Here's how:

Open image. Click on Image-->Mode-->Lab Color to convert from RGB to Lab color.
Click on Windows -->Channels to open the channels palette.  You should see a palette with 4 channels Lab, Lightness, a, and b. Drag the bottom channel b to the trash can icon.  The channel palette names will change to Alpha 1 and Alpha 2. Drag Alpha 2 to the trash can icon. You are left with 1 channel that just has the tonal values from the image.  You must convert the color mode to grayscale when done by clicking Image-->Mode-->Grayscale.  Supposedly, if you try to convert back to RGB with no color info you can confuse PS.(I haven't tried it)

You now have a grayscale image with a different tonal structure than just converting to grayscale.  You may or may not like the effect but it's another tool in the tool pouch. Experiment and have fun!
There are other ways besides RGB-Grayscale and zeroing the saturation. If you have one let everyone know about it.