A clipping mask is created using two layers of a PhotoShop file. The bottom layer of the clipping mask duo acts as a placeholder for whatever the image is on your upper layer of the clipping mask duo. This is a very common feature used in templates that you might purchase.
The easiest way to understand how clipping masks work is to try one yourself. Follow these steps to use a clipping mask that is in a pre-made template.
Click here to download a sample template to use if you don't already have one1. Open your .psd template file.

2. Open your image file (make sure both the image file and the template file are visible) and click on the image layer in the layer tool pallet. Drag it from the tool pallet to the actual template file.

3. Now, if your template only has one photo placeholder layer, make sure your image layer (in this case, Layer 1) is above the Photo Placeholder layer. If there are multiple Photo Placeholder layers (as in this collage template) find the layer that you want the photo to be placed in (in this case, we're going to use Photo Placeholder 2 - the second one in on the collage). In the Layer Pallet, click and hold the "Layer 1" photo layer and drag it down until it is above the Photo Placeholder layer that you're wanting to use.

4. This will change the layer's appearance on the template because it will now be below some of the other photo placeholders.

5. Next, you can either right click on the "Layer 1" layer in the Layer Pallet and select "create clipping mask", go to the Layer section in the top menu and select "create clipping mask", or type "Alt+Ctrl+G". This will make whatever image is on your photo layer (Layer 1) conform to only show what is in the Layer below it (Photo Placeholder 2).

6. Next, resize your image (Edit -> Transform -> Scale) to make it fit the placeholder layer to your liking. That's it.

That's it, with a little practice, you should be able to master the fine art of clipping masks!