how do I make pennant style type?

This can easily be done in Photoshop as well (even if illustrator is better).  Just type text, then select the "create warped text" button, the same way you'd make the text an arch.  Select Horizontal radio button. Set bend and vertical distortion to zero and then adjust the horizontal distortion the the desired amount (see screen shot). Hope this helps somebody who doesn't have Illustrator:)

Why not just do this in illustrator and apply a warp effect, it will be dynamic so you can adjust it all you want. i would do this in illustrator.