rotate text

Question with some pictures to show a little more detail on what I need help with..under the cut.

What I want to know is how to rotate the font on Adobe Photoshop 5. So, here's what I start off with:

Then I put on the text:

I right click it and then go on "Free Transform," I think it is.. but when I rotate it:

The background has erased where it was.

Does this make sense? Well..please help, anyone. Thanks!