Download Pixel Bender http://labs.adobe.com/technologies/pixelbenderplugin/
Download Droste Filter http://www.adobe.com/cfusion/exchange/index.cfm?event=extensionDetail&loc=en_us&extid=1700080
The Droste effect is a recursive image or to put it another way it's an image within the same image.
Creating it in Photoshop is surprisingly simple if you have Photoshop CS4 or CS5 and the Pixel Bender Plugin.
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