The first thing to know about making rounded corners is that there is like a billion ways to make them and I say billion because no body talks in millions anymore...hahahha...awe I'm so funny.

*hello, is this thing on*

*crickets*

Fine then lets get back to the whole corners things.

First let's open up that image you want to round out. If you're anything like me than you've got photoshop open while you're reading this and your switching back and forth between the two as you go so first step:

Open up Image:

This sweet Little image of Little Bird and her Daddy happens to be one of my favorites right now so we're going to use this. There's nothing special about the image. It doesn't have to be a certain size or anything. Remember this is your game you play it how you want too.

Next step:

    Select the Rounded Rectangle Tool.

Before you do anything with this tool we're going to select it's radious this is whats going to be our rounded edge so it can be as big or as little as you would like. I wanted some serious rounding going on so I pushed it up to 300 px....like this

Now that my radious is selected I can start traging it out. Start at the top left hand corner and pull your rectangle over the whole image like this

Now we're going to select our rectangle so we can cut off what we down't want. At this point the "What you should do" steps start to take on a whole new life of their own. There are lots of different ones. I like to make sure that my rectangle is fully selected and that nothing is going to be left out or added that I didn't want so I'm going to select the whole path. you're steps are:

click on the PATH tab:

Right click on the layer below titled shape 1 vector mask and select "Make selection".

This is going to select the whole rectangle, but what we want to erase is the parts outside of this selection so now we're going to inverse the selection.

Go to Select-Inverse

This is going to select those little tiny corners we are so dying to remove. You'll see those "dancing little ants" running around all four corners.
Here you're going to make sure you select your orginal background layer

As soon as you have done that click on that eraser tool and start erasing. When you're done go back up select and hit on deselect.
this is going to get rid of those ugly little "Dancing Ants"

Now you may not know this by looking at it but you just rounded out your corners. All that's left is getting it back so we can see what you've done. So click on th layer right above your background layer label Shape 1

Now right click on that layer and select Delete Layer

With that layer gone you can now see your rounded corner image and you should end up with something like this...

Now go out and create something amazing.