Help on transparent backgrounds

I use Adobe Photoshop Elements 2, and I'm making a grungy wallpaper, and I wanted to put the picture (under the cut) in the centre of the wallpaper. However, I want the background to be transparent. I created the picture in photoshop using the polaroid brushes and an imported image on a transparent background. When I tried to move the picture onto the wallpaper, the picture was not transparent. Any help would be greatly appreciated.