It's something to do with dragging the next video slightly over the previous one, this creates a short fade if I'm not mistaken...
Just click and drag it a little to the left.
The fading is an effect, and can be dragged over the previous item in the timeline in the same way.
The fade may be a "fade in" effect for the image, and then you would just drag that image slightly over the last item.
I'm not entirely sure about the image...
Possibly just add to project, drag onto the timeline, and grab right limit to extend the time shown?
then add another fade effect