I love the magnetic lasso tool. It is so smart! It will trace along an object in your picture so you can cut it out. It isn't perfect and takes some practice, but it is lots of fun. Especially if you want to doctor pictures :). This method works best on pictures where there is high contrast between the object and the background (that's how the lasso senses where to trace). You can always fix errors by closing the loop and pressing ctrl+D to deselect the marching ants to start over. You can also cover up mistakes by using a layer mask. I used to erase the extras on my pictures, but if you erase too much, too bad, so sorry, it's gone forever. With layer masks, that is not the case. Photoshop Elements doesn't come with layer masks, but the Coffeeshop blog has created an action that will make one for you. You need to download and install the action before doing this tutorial (it's free and easy-she has detailed instructions on her site on how to install them. scroll down to see the download button). She also has wonderful photo actions that you can apply to your pictures to make them beautiful.
cut outs using the magnetic lasso and layer masks
Make your corrections, and then move to the last step.
Here are two pages where I used this method. I'm not trying to be arrogant and boastful by posting the second page, it's just the only one where I used a large cut out picture. Let me know if you have questions!