Start off with an image, crop it, and wah-lah! You get a dull, sharp edged looking icon.
I thought it looked pretty dull and washed out, so I went over to my layers pallette, duplicated my base, and set it to soft light with a 100 % opacity [pssst. I usually do this to most of my icons >_o]
Next, go to your rectangle tool [or type U and it'll highlight the rectangle icon], right-click it, and once you do that, a little pop-up menu will come up with a list of other shape tools. Click on the rounded rectangle tool.
Once you've done that, go to the top of the screen where your tool bar is, and you'll see a bunch of shapes [the rounded rectangle should be highlighted], and there's also a box which says Radius and beside it type in 10 px [you can play around with the sizes, but for now I'm using 10 px]
You then go over to your icon with the rounded rectangle tool and highlight it [the way you would when you're cropping it], and then your icon will appear with a black rounded square on it.
Go to your layers pallette, double click on the rectangle layer, and there'll be a pop-up menu. Where it reads Advanced Blending change the fill opactity to 0 %. Then click OK.
Theeeen, press ctrl and right click on the rounded rectangle layer which will highlight the rectangle on your icon. Once you've done that, go up to your tool bar, click edit, and click on copy merged.
Still at the tool bar, go to file, new, and there'll be another pop-up [jeebus. So many pop-up windows .___.]. On that window, go down to where it says Contents and click on the radio button beside Transparent. Then click OK.
Paste your copied icon, and TA-DA! Its all beautiful and round.
I hope I went over everything correctly and didn't lose any of you along the way. If you have any questions about the tutorial, drop a comment.