B. Click on the top layer in the Layers Palette to highlight it:
A. Open both images in Photoshop. Select the Move Tool, then drag one photo on top of the other while holding down the Shift key. Holding the Shift key will line up the top image exactly with the bottom one.
Step 4: Draw the Gradient
 

Left: Elements

Right: CS4

B. In the Tool Options bar at the top, click on the Linear Gradient at the far left, then click on the picture of a gradient to the left (or on Edit in Elements). Then pick the third Preset from the left, "Black, White."
A. Select the Gradient tool from the toolbar on the left. If you don't see the Gradient Tool, click on the Paint Bucket Tool and hold.
Step 3: Select the Gradient Tool Options
Drag the midpoint slider in Levels to the left to lighten the image. This lightens the whole image, not just the bottom (or whatever part you want to lighten), but don't worry, you'll fix that later. And don't obsess about the brightness, as you can adjust that later too.
Step 2: Move the Levels Midpoint to the Left

You can do it as in CS3, or click on the Levels icon in the Adjustments Panel:

After
It’s easy to imitate the effect of a graduated neutral-density filter in Photoshop or Photoshop Elements. The left-hand photo is the original image. In the right-hand image the foreground was lightened in Photoshop with the "digital graduated filter" method. Here's how to do it:
Digital Graduated Filter
Before
Step 1: Add a Levels Adjustment Layer

Click on the half-black, half-white circle at the top of the Layers Palette and choose Levels:

Click on the half-black, half-white circle at the bottom of the Layers Palette and choose Levels:

Click and drag on the image to draw the gradient. To lighten a foreground, as in this example, drag from top to bottom. If you go the wrong way, just drag again in the opposite direction. Don't drag across the whole photograph, just the transition area from light to dark - the graduated part of the "filter." Dragging a short distance creates an abrubt transition - a hard-edged filter. Dragging a long distance creates a gradual transition - a soft-edged filter.
Drag through the area where you want the transition.
The layer mask created by the Gradient Tool.
Step 5: Fine-tune Levels
To adjust the foreground brightness, double-click the Layer Thumbnail to reopen Levels. Drag the midpoint to the left to lighten more, or to the right to reduce the effect.
Step 6: Combining Two Images (Full Version of Photoshop Only)
If the contrast between foreground and background is great, it may be better to combine two images taken at different exposures. Both need to be made on a sturdy tripod to ensure that they line up properly.
C. Click on the Add Layer Mask icon at the bottom of the Layers Palette. Then just follow steps 3 and 4 above.
That's all there is to it!