there are a number of ways to do fog of war, the most "correct" way is to make a projection matrix that covers the whole playing area, then project your fog map on top of everything, including terrain, models, etc.

if you dont know what that means, then you may want to do something different, like just blend your fog map over the terrain texture, and fade out your models seperately, though this can be hard.

or, if you deciede to have a very narrow field of view setting, like almost orthographic, you can simply overlay a large rectanlge above everything else, like a sqaure sprite, this would be mapped with the fog texture.

As far as making the fog texture, you can use pixel to bitmap to draw white pixels to a black texture, just use a proportion formula to find the pixel regions..