Photoshop doesn't do animations, I'm sorry to say. If you have Adobe Imageready (or whatever it's called), you can do animated GIFs with that. (Still, I dislike GIFs for multiple reasons, mainly because they ruin image quality and don't allow for playing with transparency.)
THEY TOLD ME I COULD BE ANYTHING SO I BECAME A SIGNATURE PLS HLP
There isn't a program that will automatically make them fade over to the next that I know of. If there is, it's just a shortcut for what you can do manually. Just play with the transparency of different layers, and you'll be able to make 'em fade in and out.
THEY TOLD ME I COULD BE ANYTHING SO I BECAME A SIGNATURE PLS HLP
I got my CS2 for...
*cough cough*
Free
*cough cough*
And it does animations, but it has to be a gif. and I would not recommend using gif. for your image's it seriously brings down the quality, on some internet browsers it allows transparency, and others it doesnt.
There are some programs which allow the fading of one image to another, but not 100% sure what they are.
I'l drop a old college friend of mine an email and find out.