Transparent BGs

Hello, I was trying to make some icons for this other site I use and I need them to have transparent backgrounds. Now I'm using Photoshop and I select transparent backround when I start a new project, then I select the part of the pic I want and insert it into the empty background. Everything looks fine now, but here is my problem. When I try to flatten the Image the background turns white, and if I leave it unflattened the only extension I can get is *.psd
So, is what I'm trying to do even possible in photoshop, or maybe I've just missed somthing.
Any help would be appriciated.

tee hee a common stumbling block in PS - which version are you running?

In v 5 you need to use the export to gif89a option on the file menu. This will let you dither and apply a matte to the image.

In version 6 and 7 this was replaced with the Save for Web wizard - also under the file menu.

Alternatively you can use merge visible from the layer menu and then save as gif. I think this only works in v7 though.

Thanks Polecat, that worked perfectly.