The initial version of this post was very crude and was more like a scribble. Earlier versions of Photoshop did not had the animation feature and hence the animation had to be created in ImageReady. But now, since Adobe Photoshop CS2 contains the Animation feature, you need not export it to ImageReady for this animations.
The steps and sample images have not been rewritten, instead just edited to make it more readable.
Adding the animated glow part alone is described in this tutorial. The image blending, and the fonts, and the text effects are not shown in this tutorial. The glow effect can be used not only to the text but also to other objects also. It just depends on your creative imagination.
I have taken the example of adding the glow to the text, since it becomes easy to explain.