Right, im going to show you all my method for making Camouflage (updated 16/07/2004):
1: Create a new image in whice we make the camouflage - in this example I am using an image size of 256 x 256 pixels to reduce image size, but you will probably want to raise this to 512 x 512 as you want to apply it to a skin.
Firstly, select two colours for your camouflage. Try to keep the colours dull so that the imgae does not become too vibrant and oversaturated later - I decided to do woodland camo for this tutorial and I used the colours 54,42,37 for brown and 60,67,58 for green (RGB).
2: Now, goto Filter->Render->Clouds, then to Filter->Artistic->Sponge (changing the options to Brush size 7, Definition 5 and Smoothness 14).
3: After you've done this, create a new layer (Mode: Screen, Opacity 50%). Now select to lighter brown and green colours and repeat step 2 using these new colours. Merge these layers. You should now have an image that looks something like this:

4: Now you've got this far, it's time to tweak it a little bit. Get your Burn and Dodge tools ready each with a large brush (450/500 will do nicely) on the following settings:
Burn - Midtones, Exposure 10%
Dodge - Highlights, Exposure 10%
Now run a Burn and Dodge through your texture twice (note that the more dodging done, the more desert coloured your camo will look).
5: Right, now goto Filter->Sharpen->Sharpen, then go to Image->Adjustments->Brightness/Contrast and increase the contrast by 10 to 30%, whatever looks best to you. Your camo should look similar to this by now:

6: Final stages - Get out your beloved Burn tool and, using the same settings as before, run three burns through the texture. Finally, goto Image->Adjustments->Hue/Saturation use the following settings:
Hue - +5%
Saturation - -20%
Lightness - -10%
(Make sure the 'Colourize' box is
unticked)
And the final texture should appear something like this:

Here is the camo applied onto an existing texture as an overlay layer at 75% with some minor adjustments:

Now you have no excuses for poor camo, so get to it!
I hope this tutorial can be of use to some people.