The third image format, Portable Network Graphics (PNG), is a lossless format. It was developed to solve one major problem with the GIF format: The compression method for GIF images is patented by the Unisys corporation, and there have been issues over licensing through the years.
In the process of developing the PNG standard, which is free of any patent problems, its inventors gave it some very useful features. Rather than being limited to 256 colors, a PNG graphic can have 16,777,216 colors. Rather than being limited to a single transparent color, a PNG image can specify the transparency factor of any individaul pixel. In tech-talk, this is called the alpha channel. In the image above, you see that the image of the clock becomes more opaque at the bottom.
That is, you might see it becoming more opaque; older browsers handle PNG graphics poorly, and only the latest browsers such as Mozilla 1.0 handle alpha correctly.