What's alpha blending and how to use it?
Alpha blending is the name for using the transparency information stored in the alpha channel.
Alpha blending allows one to use anti-aliasing --creating the illusion of smooth curves on a grid of rectangular pixels by smoothly varying the pixels' colors-- to make rounded and curved images that look good against any background, not just against a white background (for example). Thus the same image can be reused in many places on different backgrounds without the "ghosting'' effect that occurs when using bitmaps 1 color transparency (also refered to as binary transparency).
To create PNG files with alpha channels please check out the FAQ of the png site. (http://www.libpng.org/pub/png/pngfaq.html#transparency)