Merging two images

Just create a new BufferedImage with transparency, then paint the other two images (with full or semi-transparency) on it. This is how it will look like:

Sample code (images are called 'image.png' and 'overlay.png'):

File path = ... // base path of the images

// load source images
BufferedImage image = ImageIO.read(new File(path, "image.png"));
BufferedImage overlay = ImageIO.read(new File(path, "overlay.png"));

// create the new image, canvas size is the max. of both image sizes
int w = Math.max(image.getWidth(), overlay.getWidth());
int h = Math.max(image.getHeight(), overlay.getHeight());
BufferedImage combined = new BufferedImage(w, h, BufferedImage.TYPE_INT_ARGB);

// paint both images, preserving the alpha channels
Graphics g = combined.getGraphics();
g.drawImage(image, 0, 0, null);
g.drawImage(overlay, 0, 0, null);

g.dispose();

// Save as new image
ImageIO.write(combined, "PNG", new File(path, "combined.png"));

I can't give you a specific answer, but java.awt.AlphaComposite here is your friend. You'll get absolute control over how you want the two images to merge. However it is not straightforward to use - you need to learn a bit of graphics theory first.