Start with a simple wood texture as background. Looks like a rustic wooden table. This is actually a tileable wood texture so it can be used as Photoshop pattern. Add a Brightness/Contrast adjustment to darken the texture.
Copy this old newspaper texture in a new layer. Remove the white background. Duplicate the Newspaper Texture layer and rotate them as shown. Add a Drop Shadow layer style for each of the two layers.
Select the two Newspaper Texture layer and convert into smart object ; add a Hue/Saturation adjustment layer just for this smart object.
Add a new Text Layer using a font that you like. I will use Latha Font Type that comes included with Photoshop CS5. Learn how to install new font in Photoshop from this tutorial for beginners. To make the font bigger and also to add some rounded corners I added a Stroke.
Convert the Text Layer into a smart object and rasterize it. From this moment you can not edit the text anymore so make now text adjustments. Use the Eraser Tool and a Hard Round Brush to create sausage like letters.
Convert again the Rasterized Text Layer into a smart object. Duplicate the smart object 4 times and name the layers: 1, 2, 3, 4. Each layer will have a different layer style. So let's start with layer no.1
Here are the layer styles for the layer no.2 ; the "sausage pattern" for the Pattern Overlay can be downloaded from here. The ZIP also includes the other pattern that is used in the next steps.
Here are the layer styles for the layer no.3
Here are the layer styles for the layer no.4
In a new layer use the Pen Tool to create these shapes. After the first shape added click on the Add to shape area button to create all the shapes in one layer. Or you can add the shapes in different layers and at the end merge all af them.
To create some knife cuts from these shapes we have to add some layer styles as shown in the previews.
The sausage text effect should now look something like this:
For the final touches I have added some mustard details using a hard round brush. You can download the mustard Photoshop style from here. So here is the final result for the meat sausage typography made in Photoshop.