Open up an existing photo or document (File > Open) or create a new document (File > New).

Create a new layer by clicking on the New Layer icon at the bottom of the Layers Palette.

Click on the Lasso tool.

Click on your document and draw a jagged edged rectangle as shown. When you come back to your original insertion point, let go of your mouse and the ends will connect.

Do NOT deselect yet.

Choose Select > Feather from the Menu Bar.

Click on the Foreground color chip to choose a color for your parchment.

Click on the vertical color bar to access more colors.
Click on the large color box to choose a specific color, then click OK.

I chose a light beige.

Click on the Paint Bucket tool and click inside your selection to fill it with the foreground color.

Now you can deselect (Select > Deselect).

Click on the Burn tool.

(More recent versions of Photoshop Elements use the keyboard shortcut "O" for the Burn tool. If you don't see the hand icon in your Tool Bar, the "Dodge" or "Sponge" tool may be selected instead. Click and hold on one of these tools to get a flyout menu. Choose Burn from the list of hidden tools.)

Choose a large, soft brush from the drop down menu in the Options Bar.

You can also paint on the main body of your “parchment” paper. I recommend reducing your opacity even more and increasing the size and softness of your brush. A stroke or two will usually do.

Here’s a layout where I used the burnt parchment look as a mat for my photo and as a background for my journaling.

The leaves on the layout are from photos I took in my back yard. To learn more about selecting objects out of a photo to use as embellishments, check out my CD, The Scrapper's Guide to Adobe Photoshop Elements.