Grab a photo, create a shape that will be used to mask the picture (in this case a circle that will keep the picture within the confines of the coaster), and the letters you want to mask out of the picture.

Now select the letters and use the weld feature to make them one object.

Select both your mask shape and the letters, then select Combine and Subtract at Overlap.

When you select Engrave the shape mask should fill but the letters will be white (empty). If so, you are ready to mask the image!

Move your shape, now with the letters, over top of your photo. Select both and then right click and then select Make Clipping Mask.

Now that your image is masked, you are ready to burn the image, leaving the letters as bare wood.