GIMP Version: 2.6.11
Operating System: Windows
OS Version: Windows 7 64-bit
GIMP Experience: Intermediate Level

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Is there a filter or something that I can use to make a layer appear to fade out all around the edges as opposed to manually erasing the edges to give it that look?

If the example below is what you mean .Ihave attached a script called fade edges.

Before

After

Script using a selection

It is pretty easy to do without the script also.
First make your selection of what you want NOT faded.Use any selection tool you want.
Next go to Select>Invert
Now go to Select>Feather - feather by 25
Select ok select Edit>Clear
Select>None
That should give you a pretty decent feathering fade out effect.




If you want it to fade out to transparent add an alpha channel to the layer/image first.
Select the layer/image go to-
Layer>Transparency>Add Alpha Channel

This post by Oregonian is also a good desciption of feathering edges http://www.gimpchat.com/viewtopic.php?f=10&t=3248 Feathering edges is a technique everyone should learn.

Graechan, that is a very pretty picture, thanks for the script.

Thanks, everyone! Exactly what I was looking for.

You can also select your box (or ellipse) and then click select>>>inverse
now right-click and click "add layer mask" initilize the mask to selection
click filter>>>blur>>>gaussian blur
blur the mask to a value that makes the image fade.

The advantage of doing it this way is you don't lose your original image in the event that you decide to change your fading edges.

If you do decide to use the way i showed you or the script, make sure to duplicate your image layer first.
Doing it the way Alex shows that isn't necessary but is advisable for all your photos you work on in Gimp or any other graphics editor for that matter.

One thing i always do first is name the image something else after i open the original.
That creates a duplicate of the image , but keeps the original intact. Most times i am creating from scratch though so i do not have to do that very often.