This is one of those blog entries that start innocently enough, but which quickly become War and Peace in length. But take a second to scan it quickly if you find yourself setting text in Photoshop. Some of the tips will be familiar, but I’ll bet that others will strike you as new.
[Update: Photoshop Grand Master Russell Brown has now created a video to show off these tips–plus four more, just to outdo me!]

1. Photoshop CS2 added a WYSIWYG font menu, so that you can preview fonts before applying them. But what if you want to cycle through fonts on the document itself? Select the name of the current typeface in the Options Bar, then hit the Up and Down arrow keys. That’ll cycle through the available fonts on your system.^*
2. If you find that you’re setting the same style of text repeatedly (e.g. Times New Roman 12pt underlined, no anti-aliasing), create a Type tool preset. Click the tool preset icon (you know, that thing no one clicks in the upper-left corner), click the New Preset button, and you’ll record all your current font parameters. (This works with nearly all tools, by the way.)
3. It’s now much easier to change the settings for multiple text layers at once in CS2. Select the layers you want (Shift-click in the Layers menu to select a range, or Cmd (Mac)/Ctrl (Win)-click to select non-adjacent layers. Any changes you make to the font settings will apply to all selected layers. If you’re working with CS1 or earlier, this still works, but it’s a little more hidden: link together the layers you want to change, then hold Shift before changing the text properties.
4. If you want to curse less, hit Cmd-Return (Mac)/Ctrl-Return (Win) when you’re done setting a line of text. That way, instead of adding a line break (Return), Photoshop will commit the text edit.
5. If you’re setting paragraphs of text in Photoshop (e.g. comping up Web pages), and if the process consists of “type type type RETURN, type type type RETURN”–please, for the sake of your sanity, stop! You can simply click with the Type tool, then drag to create a text box (like this). This way, if you need to modify the dimensions of the text box, you don’t end up deleting & reseting tons of hard returns.
6. Okay, that’s cool, but what if you want to fill not just a box, but some irregular shape? Draw your shape with the Pen tool (making sure to have it set to draw paths), then hover near the inside of it with the Type tool. The cursor will change & you’ll be able to type inside the path, like this. What’s particularly nice is that the path & text stay editable, meaning that if you adjust the path, the text will reflow automatically.
7. Similarly, you can set text along a path. Draw the path, then use the Type tool to click near the outside of the path. Et voilá—text on a path in Photoshop.
8. Starting in Photoshop 6, it’s been possible to warp text by clicking the warp button on the Options Bar. Clicking it presents a range of options for warping type while keeping it editable. But did you know…
   • You can animate text warps. After creating a warp, create a second frame, change the warp, and hit the Tween button on the Animation palette. Boom–you’ve got something like this (but hopefully way less cheesy).
   • For more warping control of text, first convert the text into to a Smart Object (choose Layer->Smart Objects->Group Into New Smart Object). This provides two main advantages: you can apply a custom warp (pushing and pulling it freely, like this), and you can warp multiple text layers as a single unit. (Downside: you can’t animate a warp applied to a Smart Object.)
9. Illustrator CS2 has added a bunch of kickass typography tools–a good deal richer than what Photoshop offers. But because Illustrator now shares a type engine with Photoshop, you can set text in Illustrator using features like the Glyphs & Open Type palettes, then copy the text, paste it in Photoshop, and keep it fully editable. (Just make sure you select the letters in Illustrator, rather than the whole text object, before copying, and that you’ve clicked with the Type tool in Photoshop before pasting.) Or, if you have a lot of text in Illustrator, try exporting a PSD file (via File->Export). The amount that can be preserved–including text on a path & text in a shape–is pretty amazing.
10. Don’t blindly trust any program’s letter spacing. Take a minute to make sure your text looks decent, and adjust the kerning when letters pairs are too tight or loose. (Click between the letters, then Opt (Mac)/Alt (Win) + left/right arrow to adjust the kerning.) You may also want to see Geoff Stearns’ tips on setting good Web-res type. (The default settings for print-res work may not deliver the best results at 72dpi, and vice versa.)
11. Hold down the Cmd (Mac)/Ctrl (Win) key while you’re working on a line of text. This will let you reposition the text on the layer, without first having to commit your edit.
12. To select an entire string of text (everything on a layer), double click the layer’s thumbnail in the Layers palette.

Whew–hopefully some of that will prove useful to you. I’m sure I’ve forgotten some tips, so I may come back and update the entry later. If you’ve found tricks you find useful, please add them via the comments.
^* If you plan to do this often, you might want to go into Photoshop preferences and raise the number of undos, since each change of font counts as an undoable step.)