#1: Create a new document, mine was 300x300 and fill it
with a background color, mine was #CCCCCC
#2: Create a new layer
(SHIFT+CTRL+N)
#3: Fill the layer with a "Reflected-Gradient".
Darker on the outside.

#4: Now too make it point at the
top, do 'Edit>Transform>Perspective'

#5: Too make a wavy like appearance,
do the following: 'Filter>Distort>Shear' and drag the ball around in
2 places like shown.

#6:
Create a new layer (SHIFT+CTRL+N) and make a small white ball on top of
the hat.
#7: Now too add a fluffy effect, do
Filter>Distort>Ripple and slide the bar over between %75 and
%115 (Now it should look somewhat like the image below)

#8: Now for the fluffy bottom,
create a white rectangle, for the fluffy effect here,
Filter>Distort>Ripper and I had my settings on
%185
Now you are all done. Congratulations on making a simple
santa hat!