Step 1. Open the .psd file. Be sure that you can view the layers palette. Click on the appropriate layer for your image (in this example we will use the layer entitled "Drop Image 1 Here".
Step 2. Choose "Place" from the File menu in PSE and, when prompted, select the photo that you wish to use.
Step 3. When the photo is added to your layer you will have the opportunity to move and resize to your liking. Once you click on the green checkmark, your image will be added to the layer mask.