Transitions are used to ease the juxtaposition between various items on your timeline. Simply drag the transition to the item on the timeline you want to fit it with. They can be used on entire screens or just specific annotations. There are a large variety of transitions available, but it recommended that you keep things simple with a fade.
In the image below, the Checker Board transition is being used to end the thought bubble annotation ("Callout" from the annotations tab). Because the playhead is in the middle of the annotation, it is already half gone.
Adding a transition is as simple as dragging it on to any visual item (i.e. not audio) on your timeline. Note that the transition remains at the end of the title card.