Transparency is supported by the GIF and PNG file formats only. (For more information see File Formats and Image Properties.) This means that you can save an image in GIF or PNG format if you want it to display transparent properties on the Web.
The GIF and PNG formats create transparency by defining one of the colors in the image as transparent. The transparent color can be any color, but most often it is a color that is not otherwise used in the image.
If your existing image is of a file type that does not support transparency (such as JPG), and you try to select a Transparent color in the Tool Settings Panel FotoFinish will warn you: The current image does not support transparency. You will be prompted to convert the image to a format that supports transparency.
Converting an image to a format that supports transparency