Firstly, you will need at least two tracks.
1. For adding an iTunes song or recording to GarageBand, there are multiple options.
• You can open the iTunes sidebar within GarageBand, on the right side, and drag the audio file onto a track.
• You can open iTunes itself, and drag the audio file onto a track.
• You can open Finder, find the file itself, and drag the audio file onto a track.
2. For fading out the recording, you can use automation.
Hit "A" on your keyboard, and make sure Volume is selected in the drop-down menu on the track. It's the default setting. Then, click anywhere on the track to activate automation. From there, you can click at a certain spot on the track, and that is used as a volume transition point. They can be dragged left and right for timing, and up and down for volume.
(There are also other options in the drop-down menu, so you can test that out and have some fun!)
To fade out the audio, click on the spot where you want the audio to fade out, and click on the spot where you want it to go silent. Then, drag the line to the right of the right-most transition point all the way down. That'll mute that area of the track, and provide a gradual decrease in volume.
You can switch in and out of automation at any time by hitting "A" on your keyboard.
3. To record through your microphone, go to System Preferences, and, in Sound settings, select Input, and make sure your preferred microphone is the input.
Switch to the second audio track, and hit "R" on your keyboard to record. You can then hit "R" again to stop recording, or hit the Space Bar to stop recording and pause.
If there's anything that needs clarification, let me know!