Check out this great fade on-fade off circuit I just found on the net. I like it! It's simplistic and it works great. I'm including a link to the page I got it from. The author did well describing the process of concept design and circuit function. I suggest you take a look, and while you're there take a peek at what the rest of the website has to offer. Here's a hint: good stuff!
X^)
http://www.pcbheaven.com/circuitpages/LED_Fade_In_Fade_Out_Dimmer/
