The illusion of depth is created by the placement of  shadows and highlights. The emboss filter will give us the components for the effect, but we'll need a mask and the gaussian blur to make it work. The coolest thing is we will create this effect without using channels!

• Open the file 'basiceye.psd'
• Rename the layer 'eye' as 'ripple'
• Choose Filter > Distort > Ripple. Set the filter to amount 100 size medium
• Duplicate 'ripple' layer twice. Rename them 'thick' and 'emboss'
• With the 'thick' layer active choose Filter > Other > Minimum. Set the filter to 2 pixels
• Hide 'thick' layer - it is our mask!
• Place the 'emboss' layer above 'background' and choose 'merge down' from the layer options
• Rename this merged layer 'emboss'

Examine the layers palette. We have preserved our original, created a mask to be used for trimming, and prepared the graphic on a white background for special effects.