1. First of all, on a blank file, I cut out a ring using cookie cutter tool. Here is how my picture looks like.
2. Now I select the text horizontal type tool from left toolbar and write some text a we do normally.
3. Now keeping the text selected as shown in the image above, select the Text warp icon on top tool bar. The text warp icons shows an arc below the text "T"
5. Once i click Ok, i can use the top three options as shown marked below to make my text more comfortable with the circlular shape. These options will alow me to rotate the text, shew it or scale it so that it can fot nicely over the shape. These options appear when we try to perform any transformations to the text layer by dragging any of the corners.
6. Here is how my circular text looks like.
One can be creative and innovative with the other shapes in the Warp text dialog.