If you want to "fade out" the edges of a picture, you can use Edit | Effects | Fading Borders…. In this window, you set either a single fade width for all sides (if the Symmetrical option is on) or set them separately for all four sides. The Transparency setting determines how strongly the picture will be made transparent at its borders. You can also set the color of the background that the picture will be placed upon.
The Soft Shadow effect makes pictures seem to float above a background. To reach this function, use Edit | Effects | Soft Shadow. You can set the horizontal and vertical offset for the shadow in pixels. The Blurring setting determines how strongly the edges of the shadow are matted. Transparency affects how the color obtained from mixing the Shadow color and Background color will be finalized.
Use Edit | Effects | 3D Buttons… to reach this window, where you can make pictures look like buttons by lightening/darkening their edges. These buttons will have a 3D look.