- Create a TGA format image [24 bits, uncompressed] with a size thats a power of two, i.e. 2, 8, 16, 32, 64, 128, 256 and so forth
- Create your image or images with black [0,0,0] as your masking color
- Create a mask via Mask→New→From Image, select 'Any non-zero value' and click ok
- Save the mask via Mask→Save To Alpha Channel with name 'Alpha Channel 1', click ok
- Delete the mask on the image via Mask→Delete and click No
- Save image
- Import via UnrealEd with the "Alpha" checkbox checked.
- Feel free to compress the image.
To add a layer mask, go to the channels tab and click on the new icon at the bottom. Paint in the areas that will be visible or that won't be used for projection with white in the alpha channel (I believe), and then remembering to save it as a tga. Finally import in UnrealEd with the "Alpha" checkbox checked.
You can simply save the image with an alpha channel to TGA format. Make sure you don't have a layermask selected though, or it might save only the mask.
The best way to create transparency is using a layer mask. Right click the layer in the layers window and select "Add layer mask...". The layermask is actually just a grayscale image; black means fully transparent and white fully opaque.
The other way to do it is to add an alpha channel to each layer. Usually the only layer without an alpha channel is the background layer. Right click the layer again and select "Add alpha channel". Now you can clear parts of the layer using the eraser or select tools. They'll become transparent instead of getting filled with the background color.
Before you can safe the image to TGA with an alpha channel you need to merge the layers. GIMP will automagically do this for you just before saving (after you confirmed it, ofcourse). Note however that only the visible layers will be saved. So first make sure the layers you want to save are visible.
Import the TGA in UnrealEd and check the "Alpha" checkbox when asked.
Kerlin: Much of this is on Adding Alpha Channel To TGA Files. Combine that page into this? Suggestions, please. Don't want someone to clean up after the guy who's trying to cleanup.
Tarquin: OTOMH I'd say create a new page called Alpha Channel, and move everything to there.
Kerlin: Will do. Thanks.