I want to confirm that I had the same problem. The solution given by
LGDN fixed the problem but it it is not obvious at all.
I upgraded from Karmic, my gnome-terminal was already configured with
transparency under Karmic.
** Changed in: gnome-terminal (Ubuntu)
Status: Invalid => New
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gnome-terminal transparency no longer works in lucid
https://bugs.launchpad.net/bugs/561370
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