help me please!

hey, um .. this has been driving me nuts for so long, but how the hell do you crop a person let's say out of a picture, then make an entirely new background for it .. like this icon:


created by graphix_dollie

i have been dying to know exactly how to do this. i use psp8, i'm not so new to icon making, but it would be helpful if whoever cares to reply will explain it well; haha =] thanx in advance.

xx