To render the clouds in PS, open a new file of the resolution you require, then pick a foreground and a background colour that you want to use for the clouds. Try blue background with white foreground for a start. Next, go to "FILTER>RENDER>CLOUDS".
The picture will be automatically filled with a cloud-like pattern using the foreground and background colours you have set.
Using just the cloud rendering filter will always result in the same pattern, so you will have to add other distortions and effects to generate a variety of backdrop effects.
Thanks alot roy for the instructions. I have tried it and the hardest thing I find is to blend the edges of the subject (esp the hair portion) to the background so that it looks natural. Do you have any advice on that portion?