Step 2: Fader
Pulse Width Modulation or PWM is the simplest way to fade LEDs and MOSFETs are the simplest way to rapidly switch large(ish) currents. By combining a MOSFET with a microcontroller, I had the most flexible way of controlling the fade.
I used an Arduino to test the concept and my test rig is shown in the photo. I got the circuit idea from here: http://www.ladyada.net/products/rgbledstrip/ I only used 1 channel (White) instead of 3 (RGB).
Using this rig, I was able to develop the fader software easily. It is described in the next step.