Joan Beiriger has a post on her blog about extracting images in Photoshop. I saw that this very useful method was missing, so thought I’d post it here.
This method is precise and avoids those jagged, pixeled edges. If you’re already working in Illustrator or Corel Draw, and have never done this in Photoshop, it will be a snap for you. If, however, you are terrified of the pen tool because you think it is hard to use, I have a piece of advice: Make friends with it. You’ll be very glad you did. I can’t teach you how to draw with the pen tool here, but with some patience and practice you’ll be zipping along in no time.
Let’s see if I can make some sense here…
Say I want to lift this acorn out of this image…

I select my Pen tool…

…and draw around the acorn….

Until I close the path.

I then go to my Path Palette and select the path I’ve just drawn and make a selection of it. I can do this by either clicking on the icon at the bottom of the Path Palette (see below here)…

…or I can go to the fly-out menu on the right of the Path Palette and choose Make Selection (a dialog box will appear asking what flatness – I always enter 3 – and click OK).


Now that I have a selection, I can easily lift it off the background – I use Command J to lift the item into a new layer by itself (leaving the original layer intact), or you can use Command Shift J to cut it out of the original image entirely and lift it onto a new layer at the same time. (Sorry, I have no idea where those things are in the pull down menus!)
Voilà! A clean, precise selection. No Pixel edges allowed!

Hope that made sense and is useful!
**POST UPDATE**
Since so many have written that they will try it, I thought I’d post this as well….
The pen tool is one of those things that I have found that most artists in our biz do not use. I think everybody either doesn’t know it is there and what it can do, or they tried it once, said, this is too hard to draw with, and abandoned it. I learned it by necessity while a graphic designer many years ago. I very often needed to lift items out of backgrounds as well as creating logos, etc.
When I started using the same tool in Illustrator (which I learned before PS)…font choices were very limited back then and I wanted some elegant script cap letters to use as drop caps, so I scanned them and started drawing them in Illustrator, which necessitated learning to use the pen tool, which took practice to get the hang of like anything else. However, I will say that this one little tool is well worth the time it will take to master. I wish I could teach somebody how to draw with it, but it really is one of those things you have to just practice to get the hang of.
However, I can offer links to a couple tutorials…
This one is rather lengthy, but he does take you step-by-step through learning all about the pen tool. I love what he says in the beginning, because it is essentially, very true:
When it comes to making selections in Photoshop, there’s really two types of people – those who know how to use the Pen Tool, and those who struggle.
http://www.photoshopessentials.com/basics/pen-tool-selections/
Here is one that is shorter:
http://www.elated.com/articles/photoshop-pen-tool/
If you Google “Drawing with pen tool in Photoshop” you’ll find all sorts of tutorials, but it will take some practice to get the hang of drawing curves.
Hope this helps! And just think, if you learn the pen tool in PS, you can carry that same skill over to Illustrator.