Now tricky part - delete layer with black silhouette (but keep selection!), make sure layer with 2nd jeans is selected, then go to Layer menu - Layer Mark - Reveal selection
. Now we have the cat made of jeans on surface of another jeans! not bad but more needs to be done...
Go to Layer - Layer style - Blending Options, and apply the following effects: Drop shadow (black, with size = 8px), Outer glow (black, blend mode = Multiply, size = 3), Bevel and Emboss (settings as shown on screenshot).
Our cat still looks not too realistic, because something cut from jeans cannot have straight edges - we need to add some threads here and there. To make them, set white foreground color, select Brush tool (B), then open Brushes tool window, and from default brushes, select 4th brush from the end (it has 100px default diameter, but we need to make is about 50px).
Now, the shape of cat is stored in layer mask, so we need to draw with white brush inside the mask. click mask icon, to make sure you will draw mask, not actual layer.
Then, with small, chaotic movements, draw on edges of the cat - and look! threads start to fall out of jeans!
One more thing we need is nice shadow. Create new layer UNDER layer with cat, set its blend mode to Soft light, change color to black, and draw shadow as you like (keep layer with cat visible, it is hidden on screenshot so that you can see the shadow I made).