It's there... it may be called the 'shape' tool in early versions of Photoshop Elements, Here is what it looks like in Elements 6 Older versions may have a circle or word balloon. They all work pretty much the same. First, because it is a cookie cutter, you need to HAVE something to cut. Open a new blank file and pour any color paint. (Change later.) Click the cookie cutter or shape tool and look at the top for the shape sub menu. Click the arrow next to the word shape You'll be amazed at all you see! Here are just a few:

Choose one, click and drag on the canvas. Double click inside the image when finished and it will "cut" the image from the color on the canvas. as with this butterfly.

To change the color to something else, first select the magic wand tool
Second click in the solid color area so that it is selected.
Alternately switch to the move tool. (This works when applying a layer style.)
Next, apply an Effect.
Here is the same butterfly with the Effect Waves from Patterns.

You can add lots of different butterflies, but each one needs to be on it's own layer. This also is a great, easy way to create an simple image. Butterflies and flowers are cookie cutter images; grass is from the default brushes. Background is a pastel gradient sky and grass. Be sure to "Save for web" so the layers are flattened. This image is best saved as a .jpg because of the gradient colors.