Sprites, PNG and Alpha channel.

In Paint Shop Pro you can just mask what you want
and then copy the masked part. After that you paste
the clipboard into a new image and everything around
what you paste is transparent alpha. Works better than
a masked color bacause you get antialias against any
background.

Since Photoshop stole a lot of features from Paint Shop Pro
they probably nicked this feature too, hence it should work
for you in PS :o)