transforming images

what would i have to do in photoshop to make my images do this?

The art...
The morphing....
The animation...

I don't do much web art so I'm not very "up" on animated gif images. I do know the basics though... Looks like the had the different images in the animation on different layers and then had duplicates of those layers with lower transparency. Then they produced the animation by turning the visibility of the different layers on and off as the went from frame to frame in the animation.

In IMAGEREADY just pull up the animation pallet with the image the way you want it to start. Add a frame, and change the visibility of the layers to the way you want the second frame. repeat, repeat....