Imagine you have two images A and B, and a third grayscale image T. A and B contain just about anything, but let's assume they're two scenes from a game.
Now, assume that T contains a diamond gradient. Being grayscale, it goes from black on the outside to white on the inside.
Over time, let's assume 256 not further elaborated on "ticks" to match the grayscales, A should transition into B giving a diamond-wipe effect. If T instead contained a grid of smaller rectangular gradients, it would be like each part of the image by itself did a rectangular wipe.
You might recognize this concept if you've ever worked with RPG Maker or most visual novel engines.
The question ofcourse is how this is done. I know it involves per-pixel blending between A and B, but that's all I got.
For added bonus, what about soft edges?
And now, the conclusion