Is this...desktop Photoshop on something like the Microsoft Surface Pro? Or is this Photoshop Touch on one of the mobile platforms like Android or iOS?
Ah, well, if this is desktop Photoshop, there are many ways of doing this. The nondestructive way is to use masks.
To get started, open both images. Ctrl + A on one image to select the entire contents > Ctrl + C to copy. Switch to the other image. Ctrl + P to paste. Use the layer mask button at the bottom of the Layers panel. (If you hover for a brief moment over each button, it'll tell you what function that button represents.)
Paint on the layer mask (with the Brush Tool) with black to conceal (so that the layer underneath shows through); white to reveal (the layer itself).
If you need to resize a particular layer, use Ctrl + T to transform. Use the handles to resize and hover beyond the corners to rotate. Remember to confirm at the end using the checkmark on the Options bar or press Enter.