Just a little question.

I'm a fairly advanced PSP user, and an intermediate PS7 user. I've been spending a lot of time using PS7 lately so I'm learning some fun stuff with it. However, one tiny thing has been bugging me and interrupting my sleep lately:
How can you make transparent bits in PS7? I made an icon where I wanted some parts of it to be transparent, and I made the icon all the way to where all I had to do was make the transparency and save it. But then I could not figure out at all where I could make a transparency in PS7. Eventually I just got really frustrated, saved it as a .gif, and opened it in PSP to make the transparent parts. I don't want to have to go through all that trouble anymore.

This seems like something that should be really basic, but I just can not figure it out.

Help is greatly appreciated! :)