If you're using Photoshop, the easiest way to make sure it's set up properly, is to copy over a DDS file that already has an alpha channel (any of the default EQ2 UI DDS files), then paste your image over it and edit the alpha channel accordingly. I don't know how to "make" an alpha channel if the file doesn't already have one.
Notice I said colors can bleed over, use whatever color you want for the background while working on it, but I suggest making it 0,0,0 black before you save your final version. If you use hot pink for the background, it could bleed over onto the edges of your image due to DDS's compression.
Quib
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