If you do not see that window in Photoshop, go to Window>Layers

First thing to know are the red circled buttons. From top to bottom, they are Opacity Bar, Fill Opacity Bar, and Vector Mask.
Opacity bar and fill work to reduce the transparency of the whole layer, like this:

Now, on the Vector mask button...that is for fading PARTS of images...
First, click the vector mask button while the layer you wish to fade is selected, and y ou see the layers panel like this:

Now the Fading....Select the Paint Brush tool (shortcut key, B) and Choose black as a your first color and draw a line around where you want a specific place to be faded, and you get a fade (tip: use a soft Brush*):

Also, try using Gradients to get a directonal fade(the original is on the left)

Now, on the first picture of the layers panel, there is a White circle around "Normal..." those are blending options, you can also play around with those to get fun effects....

* a soft brush is a brush that has a semitransparent outside, while the inside is solid. When choosing a brush, they are numbers 7-18.