Transparency can only be achieved with a GIF file format. When saving your image, reduce colors to 256 (or less), then click on Colors (on the tool bar) and select Set Palette Transparency. Click on Set Tranparency Value to Palette Entry, and then move your mouse pointer over your image. Your pointer will change to an eye dropper - select the color that you want to be transparent and click the left mouse button. Done!
Save the image as a GIF file and your all set.
There's always a better way. The fun is trying to find it!