Yep, it is to do with layers. They're a bit tricky to get the hang of but once you do, it makes life much easier.
Firstly, make sure you have your Layer Palette on display ..... View - Palettes - Layers. it should show up on the right hand side of the screen.
Firstly, open a new file. That becomes your background, and technically the first layer. You should see this appear in the Layer Palette. Then open up the first pic, and copy & paste it as a new layer on top of the background. if you look at the Layer Palette, this should appear as Raster 1 and if you hover your mouse over 'Raster 1', a thumbnail of the image will show up.
Then, open up an other pic and copy and paste this onto the same background - this will be Raster 2 and will also show up in the Layer Palette.
Now - if you click on Raster 1 in the Layer Palette, this layer becomes active and you can work on it. If you then click on Raster 2, it becomes active and can be erased, softened, smudged or whatever you want!
When you're happy with the result, click Layers - Merge - Merge All (Flatten) and this will join all the layers into one. You can then do a bit more softening and smudging to blend the edges together if you want.
Bit long winded answer ........ sorry! But it does get easier every time you have a go. Good luck!
