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Transparency is created by an alpha channel. An alpha channel is like a red or a blue color channel, except that it determines how visible something is rather than how red or blue something is. Image formats with alpha channels are GIFs and PNGs. GIFs have one-bit transparency but the cool part about PNGs is they can have 8 or even 24-bit for cool effects; objects can be partially transparent instead of visible/not visible. With modern browsers that can read PNG format, you can have web pages with cool transparency effects.
To make parts of a GIF transparent all you have to do is turn off parts of the alpha channel and you're set. Hope this advice helps with more general applications of image transparency.
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