I love this technique, because it is so cute, and sooo easy :) First off, I picked up a FREE vintage frame Clip Art from The Graphics Fairy. Her site is FABULOUS!
Next, I opened it up in Photoshop and re-sized it to fit in my sidebar.
Now, double-click on your "Background" layer, and click OK.
Then, grab your Magic Wand Tool.
With your Magic Wand Tool, simply click on the center of your frame, to select the white inside the frame. Then hit the delete key on your keyboard to delete the center of the frame (now it should be transparent inside your frame).
Then, open the image of your choice.
Drag it onto your frame file, and size it down so that it completely covers the transparent area on your frame.
Now Drag your image layer so that it is below your frame layer, like so...
Now it should look something like this, feel free to add text like I have, or not :)
Then, do a File > Save for Web.
I saved mine as a PNG, but you could also save it as a JPEG if you like.