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In this video tutorial, the speaker demonstrates how to make text or shape layers in Photoshop appear as if they are wrapping around another surface. They begin by explaining the importance of matching the light source direction to create realistic shadows and wrinkles. To achieve this effect, they utilize Photoshop's displacement filter and the chosen background as the displacement map. The steps include adding a Gaussian blur and adjusting hue/saturation to enhance the background before applying the displacement filter for a more convincing outcome.