Photoshop describes Soft Light like this:
Darkens or lightens the colors, depending on the blend color. The effect is similar to shining a diffused spotlight on the image.
If the blend color (light source) is lighter than 50% gray, the image is lightened as if it were dodged. If the blend color is darker than 50% gray, the image is darkened as if it were burned in. Painting with pure black or white produces a distinctly darker or lighter area but does not result in pure black or white.
And here’s what it looks like. Notice that the band of 50% grey doesn’t change the image at all, while the lighter and darker values respectively lighten or darken the image:
In fact, Soft Light works similarly to Overlay, but is more subtle:
Soft Light can be used to “balance” images that have extreme contrasts of light or dark areas. For example, here’s a photo of me with some friends. Against the bright sky, our faces turned out prety dark:
Using the Levels dialog box, I can significantly lighten our faces. But what if I’m looking for slightly more balance?
First, I’ll duplicate the layer, Invert it (Ctrl-I or Command-I), then Desaturate it (Ctrl-U or Command-U to access Hue and Saturation dialog box, then drag the saturation slider all the way to 0).
By setting this inverted layer to Soft Light, the lighter areas of the picture are darkened (notice that there is more blue in the sky) and the darker areas of the picture are lightened. Our faces could use a bit more work with other adjustments and blending modes, but the picture as a whole is definitely improved!
You can also use Soft Light to slightly intensify colors in “washed out” photos and create soft “glowing” effects in pictures where someone is wearing light colors. In this example below, “A” is the original, slightly washed-out photo. “B” has a duplicate layer set to Soft Light, and you can see that the colors have been intensified in the tuxedo, bouquet, and wood background, but the skin colors still look natural (which wouldn’t be the case if you had simply upped the saturation of the whole image). “C” added a gaussian blur to the Soft Light duplicate layer, causing the white wedding dress to look even brighter and almost glow!