First I take the images that make up the panoramic view. I always make sure that there is plenty of overlap between each photo. That makes it easier to line them up.

Next, I create a massive canvas and line up all the images. I make the image that I'm trying to align slightly transparent. That helps me line up the little details perfectly. Sometimes I need to resize the images, or apply some kind of distortion, to make it all fit.

As you can see, all the images have different colouring. I adjust the brighness and contrast of each image until they match. I pay special attention to the sky and water, since they are large areas of mostly the same colour.

Cool, huh? Now, I apply some magic to hide the edges. Since the images overlap, I have some room to play around. I erase parts of the overlapping image so the joins are at the edges of the buildings.

Finally, I clean up the edges (the white parts). Sometimes I can just clip away the top and bottom. In case of Manhattan, I had to be more creative and use the clone tool to fill in the gaps.

In the final image, about 50% of the tree on the right is fake! Most of the sky is also just cloned. If you look carefully, you can notice that some of the clouds have exactly the same shape :)

See the final image here.