So, this is what I got, as the starting canvas...
First off, I desaturated the image a bit and tinted the whole thing a color. In my case, purple. Then, I searched for images of puffs of smoke or clouds off of Google. They have to have a solid color surrounding them. Black works best, in my opinion. White and other colors may work to an extent, though isn't recommended. This is an example of what I used...
Similar images would work too. Your cloud should be along the lines of this. The black surrounding the cloud/smoke is what you want. A nice solid color surrounding it. That will represent the bordering design. Note that I didn't use the entirety of that image in my sig. I didn't want the entire sig to be engulfed in a thick border, so I scaled the smoke layer to be bigger than the signature, though small enough to see traces of the blackness surrounding it (a bit of noticeable subtlety is nice every now and then, right?). Now delete the cloud at the center (using Gimp, I went to "Color" then "Color to Alpha." Select white (or whatever color your clouds may be), and your original image will be surrounded by the blackness. For Photoshop, try Select/Color Range. Then with the left eyedropper click the area that you want to select (in this case the center cloud). Adjust the fuzziness slider until you get what you want and there you are.
So now you have something like this...
Next, we have the designs that will be replacing the black around it. Make a new layer and get a design (in my case, I took some abstract art from Google) to cover the canvas. For Gimp, go to the layer mode on the layers window, and select "Darken only (if the bordering area is white or a light color) or "Lighten Only" (for black and dark areas). Note that if the area around an image is light, the render/character's face and/or skin will often be covered by the design when adjusting, so I prefer black.
For Photoshop (please note that I'm still uncertain about this) the process is almost the same as Gimp. Selecting the blending modes right under the layers tab, there should be options labled "Lighten" and "Darken" which should work in the same way as Gimp would. With the darkened layer (or lighter) bringing color to the smokescreen around the image, you'll now have a fading, designed effect surrounding the picture. Go ahead, maybe a smudge here and there... Just add some finishing signature touches, and there you have it.
This sig is not available as a freebie. Only Sworn to Believe (the person this sig was intended for) may use it, unless said otherwise.