Is there a way to create a cutout in a div with CSS3 like in the example below?

What I’m trying to do is create a cutout in between 2 divs as the image. The actual div that is being cut out is the div at the bottom, it has a background-color, a drop shadow, inset shadow and a border style.
What I would like to do then is put a CSS3 button inside the cutout of the div.
EDIT – NEW Solution
with
radial-gradient, it is possible to achieve new levels of quality in cutout divs: Running DemoRead more on https://stackoverflow.com/a/18853833/1654265
OLD Solution
You can do it with an homogeneus background, not with an artistic one like your. There are things that CSS will never do, for example becoming Photoshop.
However, you can do the trick using borders, negative margin and z-index;
Demo: http://jsfiddle.net/cB8Qq/
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