Dissolves, Fade-ins and Fade-outs
Dissolves indicate the passage of time. Fade-ins and outs are an option for beginning and ending you video smoothly.
Let's do a Cross Dissolve. Put a clip in Video 1A. Drag another clip into Video 1B.
Make sure that the two tracks overlap, about a second (we'll refine it later).
Open the Transitions palette.
Open the Dissolve folder, select Cross Dissolve and drag it into Transition track between Video 1A and Video 1B (toggle on the Snap to Edges button, if it's not already - it's on the bottom of the Timeline window).
Select that cross dissolve to see its duration in the Info window. Right-click on the transition, click on Duration. In the Clip Duration box that pops up, change it to the desired length.
To make the overlapped clips match the duration of the transition, make sure the clip in Video 1A ends at the end of the Cross Dissolve, and that the clip in Video 1B starts at the beginning of the Cross Dissolve.
To create a fade-in or fade-out, simply cross dissolve with a piece of black video, generated by Premiere.
To create a piece of black video for the fade-in or a fade-out, choose File > New > Black Video. It will appear in your Project clip list.
For a fade-in, drop the black video into the beginning of the Timeline. Use whichever of Video 1A or 1B that isn't used by the first clip.
Insert a Cross Dissolve into the Transition track between the black video and the first clip.
For a fade-out, insert black video onto the Video 1B or 1A track (in other words, on the track that the last clip isn't on), and then add the Cross Dissolve.
Render the transition, and watch your creation!