How to create PNG images using Photoshop

First create a new image with a transparent background. Then create a mask by clicking on the "Add layer mask" in the layers palette.

Next add the graphics such as text overlays and picture frames to the image layer and use the layer mask to control the transparency. In the layer mask white represents opaque, black represents fully transparent and values between white and black represent increasing transparency.

Save a copy of the image as a PSD file for future reference and then save the image as a PNG file named overlay.png.