One quick, simple way with a black background:

1. Set your type in white.
2. Create a new layer, fill it with 50% black.
3. Add a lot of noise.
4. Use Gaussian Blur to create clumps.
5. Copy this layer, load the type as a Selection, and Paste your clumps Into the Selection.

There are many other methods, of course...

Using inDesign

Type > Create Outlines

Paste any Photoshop image (stock or created) image into the text outlines.

An old technique is to use a Xerox machine to make a copy of a copy of a copy; each generation will degrade more.

If you want to do it as vector...

1. Get some acetate and distress in whatever fashion you prefer. Scratch...ink...wrinkle...
1a. You can photocopy/print textures onto acetate too...

2. Scan this in and adjust the colour and the levels until you get the image some black and white griminess
3. Import into illustrator and Live Trace, expand and release the paths
4. Scale this until the crappy pathing is acceptable
5. Punch cut across your glyphs

Usually I can't condone illustrator live tracing, but as your willfully distressing the face, it seems acceptable. You will get a horrendous amount of points in play using this method.

Edit.
Thinking about it, I bet there's already prepped distress illustrator textures on the interweb. Although you will miss out on the fun destruction of acetate.