How do I fade a single-layer image?

I'm desiging a banner for a website and a big concern of mine is that the sidebar should fade into the black default background of the website.

It's a single layer, the image is 32 x 346 pixels and I'd like to know how to blend the bottom quarter or so of the multicolor sidebar to the default black.

If I understand you correctly you want the bottom of the image to fade to black?
If so I would use the gradient tool on a new layer. In the options palette select the 'Foreground to Transparent' Gradient (making sure that your foreground colour is black) then create your gradient on the new layer. You may need to do the gradient a few times to get it right. Once you have it go to the 'Layers' menu and either 'flatten image' or 'Merge visible'.

If this isnt what you meant, sorry