A lot of RPGs traditionally have this feature where unexplored areas are black or foggy until the player explores those areas, then they open up and are visible on the map. Has anyone tried this or have any ideas on the best way to make this happen?

I have a few ideas to try out but wanted to see if anyone else could offer some advice before I pull an all nighter experimenting.

Get a precise image of your world and then convert your ingame position into the image position. As for now you can create a radius of which part of the map you want to draw. (Minimap Example) using an image overlay with a radius.. However you will have to experiment for how you want it.

Best advice yet is to look at the minimap tutorial and see how this displays your position on the image and covering the other parts. I wish you goodluck

I'm pretty sure the Esenthel RTS has fog of war. Maybe have a look the source for that if you get a copy.