You dont even need Photoshop, I just used the free program, "Gimp," instead!
Thanks to the help of the "BlissbyHeather" blog for their helpful tutorial! Here it is copy/pasted for those who want instant gratification:
1) On the GIMP toolbar, click on "File" then "New"
2) a box will pop up that says "Create New Image"
3) In the box beside "Width", type in the numbers "760"
4) In the box beside "Height", type in the numbers "100", click on the box that says "OK"
5) A rectangular shaped box will pop up. This is your banner.
6) If you want to add text to your banner, go back to the GIMP toolbar and click on the icon that looks like a capital letter "T".
7) If you look at the bottom half of the toolbar you can see that there are options to adjust the size of your font, the style of letters etc.
8) Click on your banner where you want the text to show up. Start typing!
9) To add other pictures to your banner, you can go to the GIMP toolbar and click "File", "Open" and browse through the files on your computer to find pictures that you have already saved. I found that in order to get a product to fit onto my banner I had to shrink the size of the picture first. I did this through an online site: http://www.resize2mail.com/ . I chose "shrink the photo by 75%" and then for some photos, I had to go back and do "shrink the photo by 25%". This was how I added the purse and wallet pictures to my banner.
10)After the photos were resized and saved, I went to "File", "Open" and found where I'd saved them. Then in order to add them to my banner, I went to the GIMP toolbar and clicked on the icon in the top left hand corner (it looks like a grey rectangle). I used this to select the areas of the resized photo that I wanted to use on my banner, and then I copied it and pasted it on my banner. (To copy, click on the piece that you want to copy, and hit the control button and the letter C on your keyboard. To paste, click on the banner where you want the item to be, and hit the control button and the letter V on your keyboard). If you want to move the picture that you just pasted on your banner, click on it and moved it.
11) To save my banner, I chose "File", "Save As". A grey box that says "Save Image" will pop up. Click on the cross icon beside "Save File Type by Extension". A white box will show up at the bottom, scroll down and choose "JPEG image" and then click on the "Save" bottom in the bottom right hand corner.
12) A grey box that says "Export file" will pop up. Click on the "Export" box.
13) A grey box that says "Save as JPEG" will pop up. You will want to move the bar to the right, so that it says 100 in the white box and click "OK".
14) You're finished!
15) To upload your new banner, sign into your etsy account, click on "Your Etsy", in the left hand colum under "Shop Setup", click on "Appearance". Under the heading "Banner" you can click on the "Browse" button and find where you saved your banner. Scroll to the bottom of the page and click on "Save Changes". That's it :)