How to get a decayed "look"

What you can do is find a surface or artwork that has the pattern that looks like the weathered look that you are looking for. Scan it and increase the britness and contrast until you only have black and white in the image. You can now use this image as a mask over your logo. You have to make sure that you don't wheather the areas with the type too much, because as you said it will not be legible. Also, make sure that the wheathering looks kinda random. Some areas too much and others almost nothing. Don't make it look like a very equal pattern.

Miss Details,

If you want to perform this manually, Ivan's post pretty much sums it up. However, just so you know, if you want to use some really cool pre-made filters for Photoshop I suggest using the “Machine Wash Image Filters” from Mister Retro.

http://www.misterretro.com/image_filters.html

I've used them many times before in everything from print/web advertising to poster artwork for bands and shows. They provide a wide range of "weathered" looks including filters for rust, denim, bleach, decay, diamond plate and so on. I consider it to be an excellent tool for many projects.

-bigczar

Try Cameron Moll's "That Wicked Worn Look"
http://www.cameronmoll.com/archives/000024.html
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Place your logo on a layer in Photoshop, select the eraser tool, select a few different brushes and adjust the opacity at various levels for each one as you "blot" spots on the logo.

I downloaded your logo and applied this technique, it took all of about 10 seconds and looks great. Unfortunately, I can't show you the result because you apparently can't attach an image to a "reply" post.

Thanks everyone for your input!