Open your pic.
On the layers pallette, double click on Background. It will change to Layer 0. (I think a dialogue box comes up, click ok)
On the layers pallette, Find the Opacity slider (upper right on the pallette). Slide it left from 100 to whatever degree of screening you are looking for.
Hope this helps!

Thank you will give it a go and see what happens... watch this space...

You can also use the blend mode and blend the photo into the background for a different transparent effect. ox

You can also open your photo selct all then copy, then go new. choose from clipboard and transparent background and paste, you will now have a transparent background

I realize this is a pretty old post but others may be having the same problem :)

Not sure what version of photoshop you have...but the easiest way to create something on a transparent background is this -

1 - create your page / picture / graphic / etc.
2 - go to your layers menu and create a new layer (make this layer transparent)
3 - put your new background layer underneath everything you have created.
4 - save as a .png

If you are just trying to make a picture have a "faded" look...
- select your image in the layers palette
- go to your opacity slider on the top right of your layers palette and slide it down.