This as far as I know is the only way of setting spot colours in PhotoShop and it's hard. This is not the same as a duotone.

You have to be familiar (intimately) with the channels pallet and colour theory.

To set a spot colour in PhotoShop you have to create a new channel and set it to a spot colour channel and pick the colour it is to be. To use the spot colour the channel has to be selected, you can't have another channel or a colour mode selected, as then you will be drawing on those channels. You can copy and paste info from other channels into you spot colour channel. The only way to get good at this is practice.

How to save your file.
The only way that I know of to get your file into another program and have it recognize the spot colours is to use the DCS file format. There are several options with this format, I recommend using the single file with composite options (dcs 2.0). If you save your files as a PhotoShop file it will also save the spot channel but you won't be able to import it into most applications. I have not tried importing a PhotoShop file into InDesign with a spot channel so I don't know if it will work. With these kinds of out there things it's not always the program that has the problem but the output device.

A note should be made that selecting a Pantone spot colour by using the custom colour option doesn't make that colour a spot colour (which technically it should). Illustrator on the other hand does create a spot colour of any of the Pantone spot (solid) colours found in the swatch libraries automatically.

Thanks for the post. Yeah its tricky with PS. :)

You might want to add in there why someone would want to use a spot color etc. :)

The main reason I would use this is if I have a scanned logo and need it as a spot colour. For example if the the job is run in two colours and you are given image to scan. "All" scans are RGB so you have to be able to convert the scan to a spot colour to run the job. If the logo is simple then usually I just recreate it in Illustrator but sometimes it's too time consuming.

Another use of spot colours would be if you wanted a touch plate or spot varnish or metallic added to your image. You could create an additional channel for that purpose.

A way of avoiding this (setting spot colours) is to use just the CMYK channels and "assign" them a spot colour. This only works if you have less than four colours running.
Say you have Green and Orange spot colours. You could say that the green is Cyan and Orange is Magenta. You create your image using Just Cyan and Magenta and when the job is run on the press Green ink is substituted for the Cyan and Orange ink for the Magenta. The disadvantages of this are that you are working with two colours that look nothing like the final output and that you cannot see or print a proof. Oh and it's confusing as hell :)

Man the technical end of printing sets my head spinning. :)

It's a science. I'm of the opinion it takes eons to master it. Which must mean freakyclean is a very old man. ;)

LOL. :D