the term "alpha channel" is the correct phrase to use when you say "transparent background".

Most images on a computer have three channel , R, G and B right? Some format allow a fourth channel, the alpoha channel. Any pixel with that channel set will be transparent and so will show the video layer underneath thorugh it when compositted on top of video.

Dunno what AVS is. If you editted the image in Photoshop then just save it as PSD (photoshop) file. Not only will this preserve the alpha channel but ti will also preserve thelayers for you. Some (maybe all I dunno) video editors will allow you to import a photoshop image and preserve the layers allowing you to animate them on your video. Needless to say the Adobe editors do this just fine with Photoshop files.

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