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In the "Layers" pane on the right side of the Photoshop window, click and drag the image that you want to fade up to the top of the pane. Click the top-most image in the "Layers" window to ensure that it is selected before proceeding. You'll see this menu at the bottom of the "Layers" section. Doing so prompts a drop-down menu. In the drop-down menu, drag the slider to the left to lower your top image's opacity. As you drag the slider, you should begin to be able to see the bottom image through the top image. You can also change the opacity's percentage value in the text box. 100% is completely opaque and 0% is completely transparent. If you've adjusted your top image's opacity to your liking, your fade is complete. You may want to adjust the opacity incrementally to see what your image looks like with a little bit more (or less) opacity before saving it.
Move the image you want to fade to the top. Select the image. Click the "Opacity" drop-down box. Lower the opacity. Review your image.