*pixel = SDL_MapRGBA(image->format, r, g, b, a);

screen = SDL_SetVideoMode(800, 600, 32, SDL_HWSURFACE | SDL_DOUBLEBUF);

SDL_Surface* temp  = IMG_Load(file.c_str());
SDL_Surface* image = SDL_DisplayFormatAlpha(temp);

SDL_BlitSurface(source, NULL, destination, NULL);

#include <sdl.h>
#include <sdl_image.h>

void applySurface(SDL_Surface* source, SDL_Surface* destination, int x, int y)
{
    SDL_Rect offset;

    offset.x = x;
    offset.y = y;

    SDL_BlitSurface(source, NULL, destination, &offset);
}

SDL_Surface* loadImage(std::string file)
{
    SDL_Surface* temp = IMG_Load(file.c_str());
    SDL_Surface* image = SDL_DisplayFormatAlpha(temp);
    SDL_FreeSurface(temp);

    return(image);
}

int main(int argc, char* argv[])
{
    SDL_Init(SDL_INIT_EVERYTHING);

    SDL_Surface* screen(nullptr);
    screen = SDL_SetVideoMode(800, 600, 32, SDL_HWSURFACE | SDL_DOUBLEBUF);

    SDL_ShowCursor(SDL_DISABLE);

    SDL_Surface* bg = loadImage("data/bg.png");
    SDL_Surface* img1 = loadImage("data/img1.png");

    bool done(false);
    SDL_Event event;

    while(!done)
    {
        while(SDL_PollEvent(&event))
        {
            if(event.type == SDL_QUIT || (event.type == SDL_KEYDOWN && event.key.keysym.sym == SDLK_ESCAPE))
            {
                done = true;
            }
        }

        applySurface(bg, screen, 0, 0);

        static Uint8 alpha(0);

        for(int y(0); y < img1->h; ++y)
        {
            for(int x(0); x < img1->w; ++x)
            {
                Uint32* pixel = (Uint32*)img1->pixels + (x + y * img1->w);

                Uint8 r;
                Uint8 g;
                Uint8 b;
                Uint8 a;

                SDL_GetRGBA(*pixel, img1->format, &r, &g, &b, &a);
                *pixel = SDL_MapRGBA(screen->format, r, g, b, alpha);
            }
        }

        ++alpha;

        applySurface(img1, screen, 0, 0);

        SDL_Flip(screen);
    }

    SDL_Quit();

    return(0);
}

*screenPixel = SDL_MapRGBA(screen->format, r, g, b, a * alpha);

To not destroy the original alpha values you could draw to the screen surface directly. If you change alpha to a floating point type and slowly change it from 0 to 1 and do something like this inside the loop

*screenPixel = SDL_MapRGBA(screen->format, r, g, b, a * alpha);

I think you will get the effect you want.

Yes, that works. Thank you.