I think you probably want to use the Application.FileDialog
as this allows custom file filters. As KazJaw points out you can't save a Photoshop file in Word so I assume its to allow some other manipulation of a psd
file.
The following shows you how to use it (see http://msdn.microsoft.com/en-us/library/aa219843%28office.11%29.aspx). Note this will allow the user to select multiple files though.
Sub CustomFilter()
'Declare a variable for the FileDialog object and one for the selectedItems
Dim fd As FileDialog, vSelectedItem As Variant
'Create a FileDialog object as a File Picker dialog box.
Set fd = Application.FileDialog(msoFileDialogFilePicker)
'With the FileDialog
With fd
.Filters.Clear 'Clear current filters
.Filters.Add "Photoshop Files", "*.psd", 1 'Add a filter that has Photoshop Files.
If .Show = -1 Then
'Step through each String in the FileDialogSelectedItems collection.
For Each vSelectedItem In .SelectedItems
'Do whatever you want here
Next vSelectedItem
Else
'The user pressed Cancel.
End If
End With
Set fd = Nothing
End Sub