This looks like a normal distressing technique with a quirk. Here is how I would do it.
1) create and adjust text to appear as final, copy, paste in place, hide one and outline the other (the non-outlined one is to go back to if you mess up), hide the outline for now
2) import image of person, trace image as silhouette, adjust where you want it in the lettering, copy, paste in place, hide one
3) Un hide the lettering outlines
4) using pathfinder (Window > Pathfinder) and with the lettering and image outlines selected, click subtract front
That should give you the effect you are after.
Steve Crook, Jr.
http://www.stevecrookjr.me
I am a simple creative professional that can get my Adobe suite and a few other creative tools to do what I want. Barely. 🙂