this happened sort of by mistake. i was playing around with shapes and i don't remember what i was trying to do but ended up creating a neat cutout using eye candy's shadowlab.
i made the shape you see on a separate layer, selected and then selection>inverse. i activated the layer below the selection then i added a shadowlab drop shadow and got this.
i'm posting it to see if anyone can tell me please how to do this using layer styles. i can't get layer styles to do things when i use selections. did we cover this somewhere? i'm utterly baffled. why can't i get a drop shadow inside a selection using a layer style? i made sure i had a layer with pixels activated but all it does is apply the style to the entire layer rather than to the selected area. GAAAAAAH!