Continuous Backgrounds.

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You bet Photoshop can do this! And it's not too hard at all. I explain exactly just this thing in my tutorial, Defining and Using Patterns and apply and expand on the techniques in the tutorials, Defining and Using Patterns: With Images & Diamond Tile Pattern.
Basically, you create your image that you want to tile for the background. It can be any pixel dimensions you like.
To test how the image will tile or meet up at the edges of itself, you select the image, define it as a pattern (Edit: Define Pattern...) and then fill a larger file with that pattern. If the edges or seams don't look good, you can use the Offset filter on the original image to get them to blend together.
That's the short answer, but the tutorials do a better job of showing you what I've said, so I'll let you read those.
Once you've got an image you want to use, just save it as a Jpeg or Gif and use your web design application to specify this image as your html background. You can find this image option wherever you choose a color for your page background.

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