Noob Question about Alpha Channels

[AsiNisiMasa]

I watched the video tutorials on this site and was able to follow them, but I don't understand what the purpose of creating the alpha channel in step one is. Maybe it's not important to know, but I figured when I start making my own designs I should. What do they do?

Also, I have Photoshop 7, but not Paintshop. Can someone help me figure out how to activate the alpha channel, properly fill it, and save it correctly in that program or do I need to get Paintshop?

EDIT: Well, I got Paintshop now, but I still don't understand the function of Alpha Channels.

[Sonictag]

they allow you to have multiple textures to show up on a surface, so if you painted a flat white line, a texture would show up where that is in game, and it might look like a path ect.