ok, i feel noobish so dont be to harsh, ive been trying to figure this out for ages. Im wokring in adobe photoshop 7, and i want to say, have two pictures fading into each other. Say, have pic a as the background, then paste pic b ontop and have it fade about mid way into pic a... ie if pic a was white and pic b was black, you'd have something like this in the end...

Paste the images as layers in a new image, then apply a mask to the image (layer) that is on top with a gradient from black to white, just like the image you have posted.

ah, cool, thanks mate!