Alpha Channels: the Basics

In all Adobe programs(and really most digital media, for the most part), there's a fourth "color", which is called the Alpha channel. Or at least this is how Adobe refers to the Alpha Channel; I find it easier to think of most images as mounted on a pane of perfect glass that is the size of your image resolution -- it doesn't matter if your image takes up the full rectangle or not, it's still there. But, if your image doesn't take up the full rectangle, then you have the opportunity to see through the glass to whatever's underneath.

This is usually represented with a black and grey checkerboard pattern. If you put this into Photoshop, whatever's underneath will show through.