I've seen this around a lot, a Picture in a Cirlce, actually you can do it to just about any type of shape you like, looks very trendy, try it out!~
First find the picture you want to use, and minimize it.
Open up a new image, make sure its background is Transparent.
Click on the Marquee Tool , the Lasso Tool or a Custom Shape Tool its right under the Text Tool and make a Circle or whatever shape you want.
Maximize the image you minimize, the one you want in the Circle, then CTRL+A (to select all) and CTRL+C (to copy) and then go to the new transparent image and CTRL+V and paste it.
Make sure your picture is at the top like in this picture.
Now go to your Layers Palette, you see the line between the two images, well hold down the ALT button and click on that line like the image below and now you have the Picture In The Circle.
Next you can right click on the Circle layer on your Layers Palette and go to Blending Options, then go to Stroke and make a black border of 1pixel. Then your done.