Two different photos
I have two different Creative Commons licensed photos from Flickr. The first is After the Rain by abdu photography.
The second is St Paul’s Kirche by galuh aryafika, female photography.
Combining the two
First lets open abduphotography photo. For this to work it needs to be on a transparent background. If you look in the layers panel you will see it is a Background layer at the moment. So double click the layer and click ok. This turns it into a normal layer with a transparent background. Then we want to enlarge the canvas so the second image can fit. Go to Image > Canvas Size and double the height. Then open the second image and drag it in. You should have something like this.
On the layer you have just pasted in lower the opacity by hitting four on the keyboard. You can now position your second image. Once you are done crop off the extra space using the crop tool.
Then bring the opacity back to 100% by hitting 0. Then in the layers palette hold shift and select both layers. Make sure the background to both is blue showing it is selected. Then go to Edit > Auto-Blend Layers. Photoshop does some magic and you have blended your images.