While creating an Image Slider, cross-fade is one of most popular effects so far. Various slider on the internet use various techniques to create such effect. Major technique I have found so far are two:

• Some use a overlay and underlay div and fade in and out each others visibility.
• While others, create a div of exact size of the slider on the slider-initialization and play with its z-index property and then fade each other consequently.

Disregarding them, what is a proper way or much better way to create a cross fade effect.

_{P.S: I would love to read answer in form of algorithm.}