This will guide you step-by-step on how to make textures with transparency for Second Life using Adobe Photoshop CS. It includes tips on how to avoid blurry white outlines and a little info on masks and alpha channels.
Step 1: Overview
Making textures with alpha channels is pretty easy once you get the hang of it. There are three basic steps: Selecting your pixels, making an alpha channel from those pixels, and saving the image as a targa file with alpha channels.
Confused as to what an alpha channel is? Let me tell you a little bit about channels, masks, and transparency. An image is like a matrix of pixels. Each pixel has its own set of values for how to display it, which is usually its color. If you've ever played with a crystal prism, you know that most light can be broken down into different colors. Pixel colors are usually stored in terms of the amount of red, green, and blue. Each of these colors can be considered a "channel" or a sub-version of the image. In red-green-blue channels values can range from 0 to 100%. So each channel is a monochrome version of the image varying on how much of that color is in the image.
To complicate matters further, we can add more channels. This is useful if we want to add more information to a pixel. An alpha channel is another greyscale image that says how opaque that pixel is. White is fully opaque and black is fully transparent.
One of the great features of Photoshop is it's ability to juggle selections to channels back and forth. A selection could be considered a temporary channel. In fact the quick mask feature lets you "paint" a selection and toggle it back and forth from a temporary alpha channel to an active selection.
This tutorial will detail how to create a selection using quick mask, and how to save it as an alpha channel.