Most people who have used Photoshop for years use the Text tool by simply clicking on their image. That works, but if you’re going to type more than one line’s worth of text, the click-and type procedure is a pain because you have to manually break lines by hitting Return. Instead, drag out a text frame with the Text tool before can always reshape the frame by dragging its corner or edge handles, or rotate the text block by dragging outside of the frame.
By the way, keep your eye on the lower-right corner handle; when there’s too much text to fit the frame, Photoshop places a little + sign there. It’s subtle, so you have to look carefully. If you want to create a new text block near or on top of another bit of text, you might have trouble because Photoshop will think you’re trying to select the existing text. No problem: Shift-click or Shift-drag with the Text tool to force Photoshop to create a new text layer. When you’re done creating or editing text, press Enter on the keypad, or Ctl-Enter (Windows) or Command-Return (Macintosh).