Most of the painting and editing tools, as well as each layer offers a menu of blend modes from which you can choose the way new colors will mix with those already there.

Basic terminology used for describing blending effects is:
Base color - this is the color that is already there. The one that you are going to paint over, onto, or add a layer on top of.
Blend color - the color you’re going to add with your paint tool, or which is already on the layer for which you are selecting a blend mode (the layer will be blending with the layers below it).
Result color - what you get after you do some “blending.”

Please note that the blend modes that are found on a tool’s options bar affect how the colors or actions caused by that tool blend with the colors that are already on the current layer that you have selected in the Layers palette. Those tool blend modes do not affect how those colors blend with the layers below that layer once the color or effect has been applied. This also applies to the blend mode chosen when using Edit > Fade; it affects how the colors are blended with the existing colors on the current layer. The blend mode setting in the Layers palette determines how each layer’s colors blend with the colors of all other layers below it in the Layers palette.

Here is the entire list of the bazillion blend modes that Photoshop offers. There is a large illustration page for every mode except for Normal, Behind, and Clear.

Please note: In Photoshop 7 they have changed the order in which the blend modes are listed in the menu. I’m using the new order on this page and in the Jump To menu since it’s the way it’s going to be from now on. Look for the symbol of the tool you want on Elements or Elements 2. Some tools on Photoshop 7 are not on Elements 2 and some on Elements 2 are not on Photoshop 7.

Normal - This is the default setting. The color applied is the color you get. In some of the color modes, this may be called Threshold.

Dissolve - If you read Adobe’s explanation of this one, I guarantee a headache. You’re better off looking at the picture in the manual. It looks like what you see when a movie does a dissolve into a new scene; there are little speckles of the scene you’re leaving mixed with the just emerging colors of the new scene. Dissolve only affects partially transparent pixels.

Behind - this allows painting, or color additions only to transparent parts of a layer. By definition, you must have Preserve Transparency turned off on the layer you are painting on. The existing image will mask whatever you add with this blend mode, and new color will only be added to empty areas.

Clear - only available for the line tool, the paint bucket, and the Fill, and Stroke commands. This blend mode makes every pixel transparent. Naturally, the layer it’s being applied to must not have Preserve Transparency checked.

Darken - looks at the two colors, the color already there, and the one you’re painting with, and chooses the darker one, whichever it is. No blending. Whichever is darker wins. Which of the two is used will vary across the image according to which is darker at each spot. This I can understand.

Multiply - multiplies the base color with the blend color. I can almost understand this one. Clearly the resulting color will be darker. I still have to try it to see what color I’ll end up with before I know if it’s right. Black times any color equals black. White times any color leaves that color unchanged. Light colors have less effect, dark colors have more effect. Repeated strokes with this blend mode produce darker and darker colors.

Color Burn - supposed to be the opposite of Color Dodge. What it looks like is, the color applied to light areas is unchanged by the underlying colors, while color applied to darker areas is dramatically darkened.

Linear Burn - (New in Photoshop 7) Uses the color data from each channel,“darkens the base color to reflect the blend color by decreasing the brightness” (quoting from the User Guide).

Lighten - reverse of the above. As the new color is applied, if it’s lighter than the color already there, it replaces that color. If it’s darker than the color that’s already there, it is not added.

Screen - From the Adobe manual, “Looks at each channel’s color information and multiplies the inverse of the blend and base colors.” Gee, that’s really helpful. Just think of it as making the light parts a lot lighter, the dark parts a little bit lighter, leaves the black parts unchanged, and nothing gets any darker.

Color Dodge - the Adobe manual says it “… looks at the color information in each channel and brightens the base color to reflect the blend color.” I have no idea what that means, and the illustration doesn’t help. It looks like the color applied to light areas is bright, but pale, and the color applied to dark areas is barely visible.

Overlay - multiplies (darkens), or screens (lightens) the colors depending on the base color. Totally unpredictable; try it and see if you like it.