In this article, I'm going to show one of many possible techniques for blending photos together to create a collage. We're going to be working with two images here, but of course you can easily extend these techniques to as many layers of images as you like. Let's get started.
I'm going to be working with two images here, as I mentioned:
A stock photo of a lonely Western road...
...and a snapshot of my cat Daphne, looking winsome:
What I want to do is composite Daphne over the Western background, somewhat in the vein of a film poster, and blend the two together smoothly to make a seamless collage.
Depending on your source image, it may not be necessary to isolate your foreground subject from its background. But in my case it is, because I want to see just Daphne's head and chest, not the stuff behind her.
So, I'm going to use the Magnetic Lasso tool and draw a loose outline around her. As I do, the Magnetic Lasso selection will snap to her edges.
We don't have to worry about being too precise, as we're going to feather this selection heavily—which we'll do next.
With the selection still active, click the 'Refine Edge' button in the Options bar to open the Refine Edge dialog. In that dialog, set the Feather high (how high will depend on the resolution of your image) so that you create a very soft blurred edge for the selection.
Before moving on, save your selection by choosing Select > Save Selection... and saving the selection into a new channel - that way, you can recall it and refine it further if necessary at any time.
Next, with the foreground image still selected, copy it, and then bring the background image forward and paste the masked image into it.
As you can see, Daphne's already somewhat blended into the background with an attractive halo because of her highly feathered edge. But she's obviously a cropped photo, and I'd like to blend her more smoothly into the landscape anyway. We'll do that next.
First, use the Move tool to reposition your foreground image to where you want it (I've moved her higher and more centered).
Next select the foreground layer in the Layers palette and click the 'Add Layer Mask' button.
You'll see a Layer Mask (the white rectangle) added next to the layer's image in the palette.
Next, click on the Layer Mask thumbnail to make sure it's selected and grab the Gradient tool from the Tool palette. Make sure you have a plain black-to-white linear gradient selected in the Options bar, then drag with the gradient in your foreground image from bottom to top. You may have to try this several times to get the right blend; the positions where you start and end will affect the final composite significantly. Here's what I ended up with:
As you can see, a gradient in the Layer Mask for a layer will blend that layer into the background, based on the grayscale values in the gradient. The darker the gradient, the more transparent the image.
As I mentioned, there are many ways to collage images seamlessly in Photoshop. As always, I encourage you to experiment with your own versions of this technique as well as exploring others.