Again I'm using Paint Shop Pro 5 to create these images.
Step 1:
Choose an image that ins't overflowing with bright colours. The lighter the image the better your background will turn out.
Step 2:
Ajust the brightness & contrast of your image. Set the brightness to about 15% and the contrast to -10%, this of course depends on how dark your image is to begin with. The darker the image is the highter you need to set the brightness.
Step 3:
The final step is to ajust the Gamma Correction. I usually set all three (red, green & blue) as high as they as they can go.
There you have it. Three easy steps to creating a faded tile background.