On Illustrator you have much more control over the way a piece of text appears unlike on photoshop. You can change both the type and font. The biggest difference is that you can create a shape using the shape tool or the anchor tool and put the text around it by simply clicking the text tool onto the line. To put the text in a curve, as seen above, you just have it follow the line of a path tool.
The second image shows what you can do to a letter once you have expanded it, this is done by simply clicking the expand button under the object heading, you’ll then have anchors on te corners of the shape you can pull and push as you like.