How to achieve this? I have a picklist with values Phone, Email, Fax. Whenever user selects E-mail then a text field should be created.

Hi Pooja,

If it's a custom object, you could use Dynamic forms and add a visibility rule on the text field so it only shows when the picklist is set to Email:

https://admin.salesforce.com/blog/2019/break-up-your-record-details-with-dynamic-forms

https://help.salesforce.com/articleView?id=sf.dynamic_forms_overview.htm&type=5