For a tattoo to look realistic if must follow the skin in form, texture and lighting. Begin with slightly blurring the tattoo layer and changing the mode to Darken or Multiply. To achieve the form, focus on wrapping the design along the curve of the skin by using a greyscale copy of the base image for a displacement.
To match the skin texture, make a copy of the base layer and use sharpening techniques to make the skin pores stand out. Clip this to the tattoo layer and set the blending mode to Overlay. To mimic the skin’s sheen and lighting, use a Luminosity selection – Ctrl/right-click on the composite channel in the Channels panel, and fill the selection with white on a layer set to Soft Light that is also clipped to the tattoo layer.
Likewise, using the same selection inverted provides a good fill for a shading layer. Use a Multiply blending mode for the shading layer and always remember to adjust the opacity of any layer that’s overpowering the effect.
Image credits: iStockphoto.com, image numbers ‘13525508’ and ‘5260804’