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Adapted from Jan Eriksson.

Start with a new image 100x100 and fill it with your background color or texture. I used grey tones for the background and the screw itself. Draw a circle with the selection tool.
Keep the circle selected and choose Selections/Modify/Feather settings=10. Choose Image/Effects/Cutout settings; Shadow=White, Opacity=100, Blur=10, Both Offsets=-5. REPEAT with settings, Color=Black, Opacity=100, Blur=10, Both Offset=5.
Select another circle within the depression you just made. Keep it selected. Choose Image/Effects/Cutout. Shadow=White, Opacity=100, Blur=20, Offset=5. REPEAT with settings; Shadow=Black and Both Offsets=-5. Now to define the edges choose Image/Effects/Add Drop Shadow settings; Shadow=Black, Opacity=100, Blur=2, Both Offsets=0. Then deselect the circle.
Next zoom in on the image. Use the selection tool and select a Rectangle, Feather=0. Make a selection (about 4 pixels in height) across the inner circle you just made. Don't deselect it. Choose Image/Effects/Cutout settings; Shadow=Black, Opacity=150, Blur=3, Both Offsets=3. Deselect and you are done.
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