A clipping mask is when one layer goes into the shape of another layer. In this example I use an image of the statue of Liberty as a container for a flag.
Make sure the object that you want to use as a container is cut out with no background and on its own layer.
Put the flag or other image in a layer above it.
In the flyout menu on the layers panel, choose the option for "create clipping mask".
The flag will be clipped into the shape of the cut out statue.
In the flyout menu you can use the option to release the clipping mask if you want.
Change the opacity of the flag and apply a blend mode in the layers panel.