What kind of grass do you have? Fescues quite often will thin out. They need to be overseeded periodically. Kentucky bluegrass is not expected to thin out. If you have that then you have issues.

Overseeding and aerating are best done in the fall or after the summer heat breaks. If you overseed now, all the weed seeds will sprout in the thin areas, and the new grass roots will die from the summer heat.

It is a hybrid fescue lawn. I core areate in the fall and spring due to the high clay levels in my yard. I'm trying to incorporate compost into the yard on a yearly basis to get the microbial activity and worms to start doing that work for me.

What is the soil like that you are trying to grow this Fescue in? How much organic matter is in that soil? How well does that soil drain? How well does that soil retain moisture? What kind of life do you see in that soil? What does that soi smell like? What is the tilth of that soil like?

Unless you have one of the creeping fescues, you should over seed every year or two to "densify" the turf. Fescue is a "bunch grass" as opposed to a "sod forming" grass. Every fescue plant stays in place and does not send runners (stolons or rhizomes) out to spread. If you want a dense fescue turf, you have to plant more seed. Kentucky bluegrass is a sod forming type that will spread to fill in where it was not seeded. Many times you'll see a mix of fescue and KBG used to take advantage of the benefits of both grasses. The hard part of that is getting colors and blades to match. Fescues usually remain green all winter but the KBG spreads to keep weeds out.

Are you watering no more than once a week, mulch mowing at your mower's highest setting, and fertilizing several times a year?

I have the same problem, but my lawn is a mix of perennial rye blend. Is that a bunch grass or sod forming grass? My lawn tend to be really soaked over the winter, and you can clearly see where its the waterlogging that is causing the thinning.

Grasses grow best in good, healthy soil well endowed with organic matter that is evenly moist but well drained. If your soil is compacted grass will not grow well in that soil. If your soil is water logged grasses will not grow well in that soil. If you have sand grass will not grow well because that sand will not hold moisture or nutrients well.
To grow a good healthy stand of grass the soil must be made into a good, healthy soil well endowed with organic matter that is evenly moist but well drained.

"I have the same problem, but my lawn is a mix of perennial rye blend. Is that a bunch grass or sod forming grass?'

Rye is a bunch grass and needs to be overseeded if you have bare spots. On a positive note, it germinates very quickly, so those spots will not stay bare very long.

I have Kentucky blue grass, and it is thinning. Any idea why, and how can i resolve this issue?

The only reason any grass would "thin" is because the environment it it growing in is not one that encouges growth. That would be the soil as well as the level of soil moisture. Take a good, in depth look at your soil and correct any problems that soil has and the grass will grow back in good and healthy and thick.

dayton, we're transferring control of this issue to you since it is so old.

How much and how often do you water? (daily, weekly, etc.)
How high/low are you mowing it?
How often do you fertilize and with what?
Is shade a factor in this?