Make a new file in RGB Mode 250 wide by 200 Height. Fill the background layer in with black.
Select the Type tool and click in the center of your image to bring up the Type Editor. Choose a cool font. Red looks cool for this effect, type a word and click OK.
Now duplicate the Type layer you just made by dragging it to the new layer button. Or go to Layer>Duplicate Layer.
Right Click on the "T" on the Duplicate Layer you just made and select "Render Layer".
Now on the same layer, choose "Dissolve" from the Layers Pop down menu
The last step, go to Filter>Blur>Gaussian Blur. Now just play with the radius setting until you have the right amount of grunge then click OK.
I choose 1.8 for mine.