I came across a great video on YouTube, which can be found at: https://www.youtube.com/watch?v=KUI-fVckmGw

This video show you how to create rounded edges in photoshop cs5.  Below are the steps:

1. Open image
2. In Layers panel right click on Background and go to “Layer from Background”, then click “OK” in Window
3. Click Layer in main menu, then New..Layer, click “OK” in window
4. Now selected Rounded Rectangle Tool in menu on left and at menu at top, select “Shape Layers” icon and set radius to 60 px or whatever you want and click and drag rectangular shape over the picture
5. Double click on layer that we just added the rounded rectangle and in the layer style panel, change the opacity to “0%” and Click “OK”
6. Click on “Paths” tab in the layer window and right click on only option, click “Make selection”, Click “OK” in window
7. Click “Edit” in main menu and click “Copy Merged” , now click “File…New…OK”
8. Click “Edit” and “Paste”…Your image will appear in new document that you can now save.