One of the most creative ways to use the Displace filter in Photoshop is to “map” an imported graphic so it follows the contours of an object in a photo; for example, adding an Illustrator logo to a photo of a T-shirt in a realistic way. Add the editability of vector smart objects and you have a match made in heaven.
First we need to choose and prepare the photograph onto which we’ll add our logo. We chose an image of a blank T-shirt from iStockphoto.com, deliberately picking one that contained noticeable folds. If the folds are a little too subtle, use the Burn tool to darken the shadows a little and the Dodge tool to slightly lighten the highlights.