Step 1: Create a New Image of any size. Under "Advanced Options", Set the Background to "Fill with Transparency".
Note: To effectively make realistic-looking fire, you need a custom gradient that goes from White to Yellow to Red to Transparent. For the Purposes of this tutorial, however, I'm going to use a gradient I made that makes Blue/Green flames, the kind you'd see when using an Alkane-burning Torch. The gradient file is attached. (follow directions at bottom.)
Step 2. Using your Custom Gradient, Hold Ctrl and Make a Straight downward line, from top to bottom.
Step 3. Create a new layer, and fill it with black. Set this layer to the bottom.
Step 4. Back in the Gradient Layer, select Filter->Blur->Gaussian blur. Set the intensity of the blur just enough to hide the different color stripes in the gradient, and give it a smooth, even look.
Step 5. Open the Filters->Distorts->iWarp tool. Set the action to "Move" and leave the Distort amount and Size at default. Starting from the Bottom-Left corner of the image, Drag your cursor to create a zig-zag pattern in the Blue-green gradient. ( Should look like -> /\/\/\/\/\/\/\/\ )
Step 6. Set the action to "Swirl Cw" and drag the tool in an irregular, up-pointing pattern on each /\ - shaped peak of the gradient. You should see the flames really starting to take shape now.
Step 7. To give your flames an even more realistic look, set the Action in the iWarp tool to "Swirl CCW". Again, Drag the peaks into an irregular, up-pointing pattern.
Step 8. Click ok, to make GIMP render out the flames.
The Finished result should look something similar to this:
NOTE: The pic above was a half-assed job. With a little more effort, you can make the flames look Mind-bogglingly awesome.
DIRECTIONS FOR USING MY GRADIENT:
Extract the attached archive to your GIMP Gradient directory. On windows Machines, it should be in (Drive Letter):\Documents and Settings\(yourname)\gimp-2.2\gradients. On Linux Boxes, it's in /home/(yourname)/.gimp-2.2/gradients. Then, once you open GIMP, open the Gradient Selector dialog and hit refresh.