I am often asked what formula I use when saving transparent gifs and quite honestly I don't have one.

Here I will attempt to clear up what is and what is not possible with transparency

I don't use transparent gifs much on my websites because of what PSPers call the Jaggies but if you know where a transparent gif will go it is sometimes advantageous to use it.
We'll get to the jaggies later

I chose this background for this page for a good reason.
On blending type backgrounds with no definite pattern graphics such as the above heading can be saved on the actual background but if I had I done this in this case it would have looked like this.

As you can see the background does not line up.

Instead I used a transparent gif but set the transparent colour to the approximate colour of the page background.
This is important because the edges of the graphic had to match.
Using this same graphic on a different colour background does not work.

Not very pretty.

It is all to do with "Anti-alias" which blends the colours on curved edges using partial transparency in order to make them look smooth because the Computer monitor is actually comprised of tiny square blocks of colour. ( pixels )
There is no such thing as partial transparency on a web page.

To illustrate this I will draw 2 circles.

Anti-alias ON Anti-alias OFF

Enlarging the edges you can see what anti-alias does.

When the transparent gif is saved PSP will choose which of the extra colours will be used according to your settings.
The more of these colours used the smoother the edge will be.
If these colours do not match the background they will produce a halo effect.

Reducing the number of these colours used by increasing the "Tolerance" often produces a more jagged effect than the non anti-aliased version.

Next "The Jaggies"