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One additional type of transform you can do with the Free Transform mode is a perspective transformation, kind of like a postcard in space type thing. So let's select this layer again, small layer. Command+T, Ctrl+T to invoke the Free Transform mode. This time we are going to hold down the entire left side of your keyboard, Command+Option+Shift or Ctrl+Alt+Shift on Windows, and grab a corner handle, and now you are doing a perspective transformation. So if you want the image to look like it's receding into the background, you can grab a corner handle and do that sort of perspective transformation.
So again I'm just holding all three keys down. I can do it from a corner handle down here and do it perspective, so like it's going off in the distance in that direction as well. So it depends on what your application is here, but yes, it is possible a perspective transformation. Just hold on all three modifiers Command+Option+Shift or Ctrl+Alt+Shift as you dragging the handle. When you like the results hit Enter. If you want to cancel just hit Escape and you are back to where you started.
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