They say a picture is worth a thousand words, so let me use two and tell you that today's article will show you how to turn this:
In other words (not two thousand, still!), a displacement mask allows you to map a texture onto a surface. In this example, I mapped a zebra pattern onto a dolphin. The options are limited only by your imagination. A common application is to create a decayed effect by mapping dirt, rock textures, etc., onto somebody's face.
Open your image, and go to the Channels palette. Pick the channel with the best contrast (it is usually the Red one, but it could depend). Click on the arrow on the right of the palette and select "Duplicate Channel". Then, select Document: New as the destination.
We are working on the new image. Go to Filter>Noise>Median. On the popup dialog, select a value somewhere between 4-8 (I chose 5 for this; experiment).
OK, and then Filter>Blur>Gaussian Blur. Select between 7-15 (I chose 8; again, experiment).
OK, and them Mode> Grayscale.
Save As a Photoshop. PSD file (not jpeg, nor anything else).
You can now close this image.
Back on the original image (if needed select RGB on the channel list to get back the colors), and go back to the layers palette. On the image, select the area you want to apply the displacement mask. Use whichever tool or combination of tools you need to.
Select> Save Selection
You can now deselect (CTRL+D on Windows; Command+D on Mac)
Paste (as a layer) the texture you want to apply. In my case, it was a zebra texture. Needless to say, the size of the texture layer must cover the area you want to apply it to entirely. Load the selection you saved before, then click on the Add Layer Mask button (or select it from the menu), so that the texture layer will be applied only over the selection (that is the area you want it to appear; in our case, the dolphin).
Change the blend mode to Overlay.
Having selected on the texture layer (it probably is already as such, if you haven't clicked on anything else), unlink the layer from the mask (click on the little chain between the layer icon and the layer mask icon).
Make sure you have clicked on the texture layer, not the mask itself
First you must select some parameters. You can experiment later if you want, I usually choose 10, 10, "Stretch to fit", "Repeat edge pixels" (I believe it is the default). Clicking OK, you are asked to select the displacement mask file. Yep, you guessed that right - it's what you saved before, the .PSD file.
You can experiment with opacity to achieve the required result. If needed, apply a low level Gaussian blur on the texture layer mask, to smoothen the transitions.