Here's how:

Here are the direction for how to blend a photo into the background for PSE users.
Open up whatever background you want to use and open up the photo you'd like to blend in. Make your photo the size you would like and angle as desired. Go to Enhance> Adjust color> Remove color. Make sure the photo layer is active and click on the small down arrow to the right of the word 'normal' in the layers palette. Select 'Overlay'. Now use your eraser tool, with the settings on a large, soft-edged brush, to remove the border and other parts of your photo that you don't want to show.

Play around with this fun toy. You don't have to remove the color from your photo if you don't want to. You can also add the "sketch" option for another interesting/artistic look. So many options! Have fun!