Step 1 

Create a new document then add a background that will suit the theme. I used purple gradient for the background.

(Document size: 250×250. Gradient: #e9d5ed to #9533ad.)

Step 2

Start by making a new layer, then making a rounded circle somewhere in the middle of the document. The size of my selection is 49px x 49px.
Now fill the selection with any old color, I used #f7ee67, but it doesn’t matter, we’re going to apply layer styles to it.

Now apply the following layer styles:
Drop Shadow
Gradient Overlay
Now you should have a result like this:

Step 3

Now let’s add the highlights on the left of the face.
Create a new layer then select the main face layer by holding ctrl and clicking the layer’s thumbnail.

Contract the selection by one pixel by going to Select > Modify > Contract in the Photoshop menus, and using 1 pixel.
Be sure you’re on the new layer then fill the selection with white (#ffffff)

With the selection for the smaller circle still active, move the selection about 4 pixels to the right and 1 pixel downwards.

Press delete to remove the part inside of the selection.

Zoom in on the moon shape and erase a 1 pixel line like so:

Now duplicate the ‘moon-shaped’ layer, call the first one ‘top,’ and call the second one ‘bottom.’
On the ‘top’ layer, remove the bottom half, on the ‘bottom’ layer, remove the to part, so their separate.

Now change the layer opacity for the ‘top’ layer to 90%, and change the layer opacity for the ‘bottom’ layer to about 60%.

Step 4

First make a new layer, then make a selection about 5×5 in size, fill it with this blue: #2b37a5.

 All you have to do is duplicate, move to the right then merge together.
(Note that I moved the right eye approximately 14 pixels to the right.)

 Step 5

Now let’s add the mouth!
Create a new layer then make a rounded selection similar to this:

If you can’t seem to get it right, just copy the above image into photoshop and make the selection over it.
Fill the selection with black, or any color for that matter, and fill in the sides of the circle to make it square on the sides.

Now delete the top half of the mouth so that the top is flat.

Now apply the following layer styles to the mouth layer:
Gradient Overlay
Stroke
You should be left with a result like so:

Step 6

On a new layer make a selection the entire width of the mouth, but only about 5 pixels in height at the top of the mouth, these are the teeth!
Fill the selection with white (#ffffff.)

Apply the following layer styles to the teeth layer:
Inner Shadow
Gradient Overlay
Now you should be left with a result like so:

All the smiley needs now that it doesn’t have already is one of those soft, little shadows.

Finish