This is how I do it in Photoshop.
I open my graphic or image. Image mode is RGB. I then open the channel window. There I'll see 4 channels (RGB, R, G, and B). I then click on the new channel icon which will create a channel named Alpha 1. This is in black. To make it transparent I will fill the entire canvass with white. I'll then go back to normal layers then save the graphic as .TGA and choose 32 bits/pixel then OK to save the graphic.
The graphic will be transparent when uploaded to Second Life. That is how I do it. I hope it helps.
EDIT:
This link might explain it better:
http://robynhuffaker.com/sculptblend/tu ... otect.html