PNG's have what's called 'alpha transparency' - that is, you can make
parts of an image, say, %50 transparent (unlike GIF's which have
'binary' transparency - pixels in them can be either some color or
completely transparent). This feature allows for visually smooth edges
(unlike jagged ones in GIF's).

Majority of modern graphic editors (Photoshop, Fireworks etc.) let you
produce such PNG's.

- Baglan
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