This is a quick guide to making flames that can be placed along the bottom of an image in a few simple easy to remember steps.
Getting started.
I'll be using Photoshop CS2 for this, but it will work on later versions also. Most of the tools we will be using are almost identical.
1. Ok, now first off open a new image. Use similar settings to me. If your putting the flames over an existing image or signature image use a transparent background.

2. Now that you have a blank image open, choose a foreground and background colour. I used red and yellow, if your looking for a magic fire effect you could possibly use shades of blue and green.

3. Alright, once you've done that lets focus on the image again. Select the Rectangular Marquee tool, Now use it to select a small portion towards the bottom of the image as shown.

Now right click inside the selection and select fill from the menu that drops down from the cursor. Fill the selection with the lighter one of your two colours.

4. Move the selection up slightly and place above the lighter shade. Then repeat step 3 but this time fill it with your darker colour. Note: you can achieve this step using the Bucket tool also.

5. At last! The boring bit is over. Time to let your creative juices flow and sculpt some tongues of fire!
Select the smudge tool and a decent brush diameter. Proceed to smudge the lines upwards and I swishing pattern similar to fire, make sure u start smudging in the light colour then drag it through the darker colour. If you start smudging off the canvas you will have transparent or lines the same colour as your background inside the flames, and it will ruin the effect.

Depending how effective you manipulate the smudge tool. You should achieve an effect similar to that above. This effect can be used in a matter of instances including avatars and signatures. =] enjoy.

Here is an example of layering the flame layer on top of another image. Hope you find it useful.