1.) First, we want to make sure we preserve our original image, so activate the t36-badsky.jpg image, go to File > Save As and save a copy as newsky.jpg.
2.) Use the magic wand tool and click in the sky area of the image. This will not select all of the sky, but that's OK. Next, go to Select > Similar. This should add the rest of the sky area to the selection.
3.) Make sure your layers palette is visible. Go to Window > Layers if it is not. In the layers palette, double click on the background layer. This will convert the background to a layer and prompt you for a layer name. You can name it 'People' and click OK.
4.) Now the sky should still be selected so you can press delete on your keyboard to erase the boring sky.
5.) Go to the t36-replacementsky.jpg image and press Ctrl-A to select all, then Ctrl-C to copy.
6.) Activate the newsky.jpg image and press Ctrl-V to paste.
7.) The sky is now covering up the people because it is on a new layer above the people. Go to the layers palette and drag the sky layer below the people. You can double click on the text 'Layer 1' and rename this to 'Sky' also.