- PNG supports Alpha Transparency, that is that the image can have different levels of alpha (or opacity) throughout.
- GIF supports transparency too, but any part of the image can only be either transparent or opaque. There is no gradual shift, no "Alpha" level to adjust. (And transparency eats into 1/256 of your available colors.)
- JPEG supports neither form of transparency.
Internet Explorer did not support transparency in PNGs until IE7, I believe that it would show black instead of the page behind the PNG image. It did, however, support PNGs. (Which are still a great way to achieve a non-lossy, high-color image. (even without transparency))