First thing you will need is 2 images that will blend together nicely.
Make sure they are both in the same resolution (72 dpi for the web) and color-space (RGB in this case). Open both these documents in Photoshop.
These images are from Dollar Photo Club.
We will want to combine both images into 1 document. Now select the move tool “V” key.
Drag one image into the other window and a new layer will be created automatically. If you have the application frame on (shown), drag into the tab at the top for the second window, drag and release in the middle to combine the two images into one document.
Tip: To center the new image in the window hold down the Shift key while dragging.
We will add the Layer Mask
Click on the add layer mask button
This will create a new layer mask. A layer mask is transparent. When you paint black into the mask it allows the image underneath to show through. Where it is white, the underlying layer will be hidden.
Press the “G” key to select the gradient tool. Make sure the foreground and backgrounds are set to black and white. “D” key. Select linear gradient and foreground to background.
Now drag the gradient across the image.
You will now see the two images blend together and the mask will have a gradient in it as shown
You can see the gradient in the layer thumbnail and the result on the image. Where it is white, the top image shows and where it is darker the back shows through. Experiment with different angles and start and end positions. Because a mask is non-destructive, you can experiment as much as you like with different gradients in the mask,
Try changing the blending mode to something different for a different result, in this case I liked what Screen mode did to the feel of the image.
You may also use any of the brush tools on the mask. Black will “paint away” the image and white will “paint it back”. Use a soft brush for best results.
I hope you enjoyed this tutorial and let me know in the comments or forums if you want more on collaging and compositing techniques. This is one of my specialties.