STEP 1: Open up any image to use. STEP 2: On the image's layer, right click then choose 'blending options', a blending options window will pop up. STEP 3: Click 'stroke', Position: Inside. You can also change the color and size of the outline. STEP 4: You're finally done! Decorate the background however you want to (: be creative!
I Hope this helped, sorry if it was hard to understand.