Not all image files have a visible background. Transparency is created in an image with the addition of an alpha channel. Digital image files have a channel for each of the primary colors that make it up. For RGB images, there is a channel for Red, Green, and Blue. For CMYK images, there are channels for Cyan, Magenta, Yellow, and Black (Key). Each of these channels contains information on how much of each color is needed to create a specific color in the image. Adding an alpha channel allows the file to contain information on how transparent an area is.
The alpha channel can control the transparency of a color. Some image formats can even vary the amount of transparency. The alpha channel can blend from opaque to transparent.
The most common file types that support transparency (alpha) are:
Transparent background images become especially useful when printing on a colored product. Printing an image with a solid background can result in printing a block of color around the image.
Using a transparent background can eliminate that block, although some RIP software have the ability to remove solid backgrounds without editing the image.
Not all file formats treat transparent alpha channels equally. Files like .TIF, .PNG, and .PSD allow for different levels of transparency.
*.GIF files only support 0% or 100% transparency. There is nothing in between. Pixels are either completely transparent or completely opaque. If the image has an area of color that is fading from opaque to transparent, this format will not work well.
Files like .JPG don't support transparency at all. They always appear with a color in the background.
In the example below, three different file types were placed on a light grey background. The .JPG has a white box around it. The .PNG has a transparent background and is able to show multiple levels of transparency in the drop shadow. The .GIF has a transparent background but is unable to represent the subtleties in the drop shadow. The shadow just disappears.