1.First, load a new image. I created a new document and pasted this image onto a new layer, but it could just as well be the default background layer. This will be our "base" image.
2.Load up another image and paste it into the first image. A new layer will automatically be created. Rename the layers to Image1 and Image2 if you'd like.
3.Your Layers Palette should now have two layers, each with the images you loaded. If you don't see the layers palette, use the Window>Layers menu (or press F7). Now, click the top layer (in this case, "Image2") to make it the active layer. In the next step, we'll be creating a mask for this layer so it can blend through to the layer below it.
4.There are many ways to create a mask, but the easiest way is to turn on "Quick
Mask Mode". In this mode, anything you draw will be become your mask. Press the q button on your keyboard, or click the
quick mask mode icon (
)
near the bottom of the tool bar to enter quick mask mode. Now, since we want to fade two images into eachother, I'll create a vertical gradient,
from white (representing 100% opacity) to black (0% opacity) using the gradient tool (
).
While in quick mask mode, the gradient you create will be displayed in shades of red so you can better see it . After using the gradient tool, you should now see something like the image below.
5.Now that we've drawn the gradient quick mask, we go back into "standard
mode" by pressing the q key once again or by clicking
the standard mode icon (
) near
the bottom of the tool bar. This will create a selection based on the quick mask, which we'll use in the next step.
6.Our next task is to apply the mask we've just created to the top layer. This will allow the layer
to control its transparency based on the mask. To do this, all you
have to do is click the "Add Layer Mask" button (
)
on the layers palette. Your layers palette should look like the image below.
7.That's all there is to it. You should now see your two images smoothly blended together like the image below.