This tutorial is for easy blending. There are many different ways to blend, including using gradients and masks (something I haven't quite mastered yet)and simply using the eraser tool.
I use the feather tool, it creates the best results for me.
We're actually using Passions pictures this time! Yay!
Those two Foxney caps (from Desire, actually) are the ones we'll be using for this.
Okay, now you have two options. Create a new canvas, or just blend using the ones you have. Basically, do you want to start a whole new picture, or do you want to just paste one on top of the other and call it a day?
I'm lazy, I'm doing with the second option. So, make sure the image you are starting with is not on the background layer, and go to Image > canvas size. I anchored my canvas to the right, and changed the width by adding 200 pixels. (you may need to add more or less depending on what pictures you're using, but you shouldn't have enough added pixels that the second picture would fit perfectly. They should overlap.)

That's what my image looks like now.
Now, you paste the other one on top.

Now, on your taskbar (that little vertical rectangle thing), pick the rectangle marquee tool, that little dotted line box. Right under the toolbar (where file, edit, etc are) there should be a new set of options and one of them will be "feather". Right now it should be set at 0 px, but you should set it at 10px.
So, when you select, it won't be a box, more of an elipse:

Then go to edit > cut, and there you go!

That's really pretty much it.
From there, you can do effects and whatever, or clean up the blend.

Which is what I did. I did some effects on the images and added color and a pattern. Whoo!