You have to make sure you are working on a transparent background for any Alpha channels to work.
Quick Guide:
Goto the FILE tab up top, and open a New image. In the window that pops up it asks you to chose your image settings (Width/Height ect). At the bottom of the window theres a box 'Transparent' Make sure this box is checked. Hit OK.
The window that opens should now be where you do you work. It shoud be a grey/white checker background -indicating its transparent.
Once you have done whatever it is you are doing,erase everything you *don't* want to show so you can see the grey/white checkers behind your work.
Goto LAYERS tab up top,click 'NEW MASK LAYER' move your mouse down to FROM IMAGE and left click. In the litte window that pops up make sure the bottom button (Source Opacity) Is the only thing checked. Click OK.
Goto LAYERS tab up top again,Look near the bottom of the drop down menu for LOAD/SAVE MASK.In the next drop window that opens,click SAVE MASK TO ALPHA CHANNEL. A window appears showing you your work in white,with a black background all around it.That is the Alpha channel. Hit SAVE.
Now goto FILE tab up top>SAVE AS. Name your work, and where it says SAVE AS TYPE
Be sure to save it as a Truevision Targa (*.tga) File.
And thats it. When you are in game, UPLOAD FILE,find the work you have just been working on from the folder you saved it to. The window in SL will pop up with your image preveiw,and if its worked ok, you will see your image surrounded by the grey/white checkedboard background.
Hope that helps. Good luck
