How to create transparent text on a solid color background?

Question

I want to create a transparent text on a solid color backround, and I need text transparency to go all the way to through the image (i.e. do not show the solid color background). I have the transparent background layer, the solid rectangle layer that occupies part of the image, and the text layer (with text element) on the top of the solid rectangle layer. How do I make text transparency to go all the way through? Here is a similar example for Photoshop CS, only in my case, the backround layer is transparent (i.e. there is no picture): http://www.photoshopessentials.com/photo-effects/transparent-text-area/. Basically, I need to make the letters see through, so they show the backround color on which the image will be placed. Is it possible to do in Photoshop Elements? I'm using version 9 on Windows 7. Thanks.

Answer 1

Thank you all for the suggestions, especially 99jon. 99jon's walktrhough is helpful, but I was hoping to find a workaround that would allow keeping transparent text that goes all the way through all other layers to transparent background as a text level, but once I flatten the image, I'd lose the text layer, so I cannot make any changes to it (like slightly change the font, size, style, face, etc). Let me clarify a bit what I'm trying to do to see if there is an even better option.
Say, I need to have a 300x300 pixel image that (forget about photos) consists of a solid-color circle (circle can be white, black, red, blue, or any solid color, or gradient, does not matter) on a transparent background, and inside of this circle I'd like to cut out a word (say, the word "TEST" with no bevels or other decoration, just flat font) all the way to the transparent background. I just need a circle with text cut out and showing around the circle and through the word "TEST". So if a circle is white and I place the image on a blue background, the word "TEST" would be in blue (so would be the area around the circle).
Is there a way to set it up to allow changing the color of the circle (say, from white to black, or blue, or red) and keep smooth edges of the text (and circle) blending with the background (i.e. avoid jagged edges) without redoing every color variation from scratch? Like, getting some master file which would define size and position of the elements,a s well as font, etc, and from this master file, use simple adjustments to change the color.
Ideally (in my dream world), there would be an option for the text element to be of transparent color that would go through all layers below it. But there must be a not too complex way to do this, right?