The most basic type of transition is a cross dissolve where one scene fades/dissolves away as the new scene fades/dissolves in. To create a dissolve move the current position marker to the point on the timeline where you want the dissolve to begin and mark it as an in-point. (note this point should be before the scene you are dissolving from ends so there is some overlap as seen below)

Find the point on the timeline where you want the new scene to end and mark it as an out-point. Then select the Video 1B track by clicking on it. Your timeline should now look similar to the one seen below.



Load the scene you want to dissolve to into the source monitor, find and mark its in-point and then press the overlay button. Your timeline should now look something like the graphic below.

Next open up the transitions pallet and locate the Cross Dissolve transition in the Dissolve folder. Drag the Cross Dissolve effect icon onto the transition track on your timeline and drop it in between the overlapping video tracks as seen below. The cross dissolve effect will automatically fill the overlapping area as shown below.

If you double click the cross dissolve transition on the timeline, the settings window for that effect will open up. This is where you can look at and modify the settings for the dissolve. As you can see by the down blue arrow in the graphic below, the transition will go from the Video 1A track to Video 1B track. If you wanted the dissolve to go from Video 1B to Video 1A you can click on the arrow once and it will reverse itself and point up. These basic steps will work for all the transition effects.

If you play the time line now, you will see an X in the upper left hande corner of the record monitor when you get to the dissolve. That is because the effect is unrendered. All transitions and filters need to be rendered to be seen. I will discuss rendering effects later on.