Even though you are not aware of it, your eyes are always making tiny jittering movements. Each time your eyes move, they receive new information and send it to your brain. You need this constant new information to see images.
Your eyes also jitter when you look at this dot, but the color changes at the edge of the dot (as seen fuzzily through the waxed paper) are so gradual that your eyes can't tell the difference between one point on the dot and a point right next to it. Your eyes receive no new information, and the image seems to fade away. If the dot had a distinct border, your eyes would immediately detect the change when they jittered, and you would continue to see the dot.
You may have noticed that, although the dot fades, just about everything else in your field of vision remains clear. That's because everything else you see has distinct edges.
For more information, we suggest you read the sections on lateral inhibition and chromatic lateral inhibition in Seeing the Light, by David Falk, Dieter Brill, and David Stork (Harper & Row, 1986).