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My new favourite technique for alpha transparency is the use of PNG 8 graphics created with Fireworks which apparently is the only graphics package to export them according to spec. Proper PNG 8 images give you nice alpha transparency for nice browsers and index transparency for the others. In other words, a hack-free, single image solution that degrades gracefully. Check out this article: PNG8 – The Clear Winner

Obviously, if you absolutely require alpha transparency for IE6, this is not for you but in this day and age I think simple index transparency is good enough for IE6 users out there.