How to get this:
1. Add the image as you do and specify the filter property in the styles.
2. Set the onmouseover and onmouseout event to alter the filter
<img src="some-image.gif" style="filter: alpha(opacity=20);"
onmouseover="this.filters.alpha.opacity = 100;" onmouseout="this.filters.alpha.opacity = 20;" />
And all's done. :)
We can add some javascript call instead of setting the opacity directly which would reduce the opacity gradually making a fading effect. Clean and Simple.