[Sashok)]

Прошу прощения! Вот вроде исправил!

div#rotator div { position:absolute;}

function theRotator() {
$('div#rotator div').css({opacity: 0.0});
$('div#rotator div:first').css({opacity: 1.0});
setInterval('rotate()',2000);
}

function rotate() { 
var current = ($('div#rotator div.show')? $('div#rotator div.show') : $('div#rotator div:first'));
var next = ((current.next().length) ? ((current.next().hasClass('show')) ? $('div#rotator div:first') :current.next()) : $('div#rotator div:first')); 
next.css({opacity: 0.0})
.addClass('show')
.animate({opacity: 1.0}, 1000);
current.animate({opacity: 0.0}, 1000)
.removeClass('show');
};

$(document).ready(function() { 
theRotator();
});

<div id="rotator">
<div class="show"><img src="img/1.jpg" width="200" height="300" style="border:1px solid #CCC"/></div>
<div> <img src="img/2.jpg" width="200" height="300" style="border:1px solid #CCC"/> </div>
</div>