I can tell you how to do it in PhotoShop5. Basically its two pictures on different layers. Just go up to the Layers menu... select Add Layer mask... Reveal all. Now select the Gradient fill tool and drag a gradient fill across the Image. Instead of a gradient fill it blends the two pics with the speed of the gradient transition. You can use any of the gradient tools to do this in fact you can even paint this effect. Well I hope this is what your after.

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"The true sign of intelligence is not knowledge but imagination".

Albert Einstein