Instructor Donald Gambino teaches students how to use it in his Photoshop Basics course:

In your Tools palette, find your ELLIPSE tool (NOT your Elliptical Marquee!)—if it's not on top, it will be lurking under your Rectangle or Line tools.

Now, in your Options Bar for the Ellipse tool, make sure the leftmost button is selected

This button will make the ellipses you draw into paths that you can then type on. Pick a color in your Options Bar for the ellipse to fill in with, or make it white if you don't want the ellipse to be visible.

To actually add the text to the path of the ellipse, choose the Text tool and move the cursor over the shape. You’ll see your cursor change as you move it over the outline of the ellipse. Click and start typing!

You can use any of the shapes under the Ellipse tool, and you can draw your own paths with the Pen tool. You can even edit the path after you’ve applied the text to it.