Hi,

There are different ways to apply a transition onto your photo in PhotoStory. If you look at your photos lined up in the lower section of the program window, either in timeline mode or in storyboard mode, you should be able to locate the [A|B] transition symbol on/between the individual images. Click on that to pick what transition should be used to fade in/out an image or fade in between two images. You can also find the transitions in the "Fades" section of the mediapool, from where you can just drag & drop the desired transition down onto the photos in the timeline.

I hope this helps.