There are many ways to create composit in Photoshop. Composits and Collages are actuall the same thing with different names. Both are layerd Photoshop document with images on different layers and masked to create a composit. How the composit looks is depends on the masking is done. I have created a Photo Collage Toolkit for Photoshop and I beleive its documentation shows that Collages and Composits are just layerd documents with layer mask. My toolkit uses smart object layer for images. This produces documents with more Photoshop over head but greater flexability. You can always save a final flat document in Jpeg or PNG format to produce a small output file.
Documentation and Examples for my toolkit which shows masking is the only difference Composit/Collage. Composit is the general term Collage a term tht for some has a differen look a more formal one they are all composits
Trevor and JJMack have provided you with a lot of useful tips.
The one thing that I would reenforce is the use of Layer Masks, for your Composites. That will allow you to do non-destructive editing, and you can go back years later, and make changes - IF you Save your Layered PSD file.
For doing what I think that you are working on, I will make a rough Selection of the Image to be Composited, and drag it, or Copy/Paste it into my background Image, and then create a fine-tuned Layer Mask for it. Note: it will come in as a Layer, which is what you want.
The Help File has full details on both Layers and on Layer Masks. I would definitely read both sections. Every moment spent with those two subjects, will pay dividends later.
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