Our clients are always asking us how to create images with nicely rounded corners. So here is a quick Photoshop tutorial that explains exactly what you have to do.
Lets start...
The image below has 90 degree corners. We want to edit this image to give it smooth rounded corners

What we need to do...
In Photoshop, look at your Layers palette - which is normally bottom right. You should place a new layer above the layer that contains your image.

Select this layer, then we need to draw a rectangle using the rounded rectangle tool which resides with the tools on the left.

On top of your image, with the top layer still selected, draw a rectangle on this layer.

Where ever you have drawn your rectangle will be the rounded corner image you'll end up with.
Select the top layer in your Layers palette and double click on the layer to open the Layer Style as below.

Change the Fill Opacity percentage to 0% in the Advanced Blending area as shown above.
In the Layers palette, click on the Paths tab and with the current Path selected, click on the little arrow button, in the upper right corner of the Layers palette, and select 'Make Selection'.

A Make Selection option box will appear. The Feather Radius needs to be set to 0 pixels and the Anti–aliased needs to be checked.
The final thing to do is to go to your Edit dropdown and then click Copy Merged. Then create a new document and paste your new rounded corner image into the new layer.
You should end up with a nice smooth rounded corner image as below.

Good hey... best of luck.
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