This is an intermediate tutorial. I am using Photoshop CS2, a.k.a. Photoshop 9.0.2.

Bubbles are visually interesting because they reflect, can be transparent, have an iridescent sheen, and float. Sometimes this combination of characteristics can be hard to recreate. I’ll try to show you how. I’m starting with a photograph for my bubble to appear on. You can right click to copy it if you want to work with the same photo:

1. Open your photo

2. Using the elliptical marquee tool, draw a circle on your image. (If your rectangular marquee tool is showing in the tool box, hold the mouse over it, click and hold, and a fly-out menu will appear for you to select the elliptical marquee tool.) You can make your ellipse any size you want, and if you hold SHIFT while you draw it will make a perfect circle.

3. Press Cmd/Ctrl+J to copy your elliptical selection to its own layer.

4. Cmd/Ctrl+Click on the thumbnail in the layer palette to load the layer as a selection. You should see the marching ants in a circle as shown.

5. Select Filter from your main menu, then distort>spherize. Select an amount of 100% in the spherize menu that pops up.

6. Reapply the filter. Either Press Ctrl/cmd+F to re-apply the filter or go to Filter>Spherize (your most recent filter is listed at the top of the Filter menu now).

7. Your bubble area should now be distorted, and we will add a reflection to create a shiny surface. Create a new layer and name it ‘highlight’.

8. Make white your foreground color. Choose the gradient tool (on the fly-out menu of your paint bucket tool), and use the linear, foreground to transparent gradient.

Start from the top of the bubble and drag about 1/2 way down as shown.

9. Now right-click on Layer 1 for your blending options and select Bevel.
Style: Inner bevel, Technique: smooth, Depth: 29% (keep the other options at their defaults.)

10. Cmd/Ctrl+Clickon the thumbnail in the layer palette of the Highlight Layer. 

11. Click “Create new layer” to add a 4th layer (It should be Layer 2 on top of all your other layers).

12. Select your gradient tool and from the pre-loaded gradients select Spectrum (the full rainbow). Double click on the gradient to edit it, and remove the 2 darkest reds (the outermost colors) and the dark royal blue. Just click on the arrow by the color and drag it off the window to remove it.

Apply this newly edited gradient to Layer 2, then lower the opacity of the layer to 11%.

Now you have a round, shiny bubble!

If you want to place the bubble on different areas of the photo, reduce the opacity of layer 1 to 10%-40% and then group your top 3 layers and drag them anywhere on the image. Here I have copied the group a few times, changed the sizes and the opacities to place Lucy on the Beach among many Bubbles.