Using pixlr to make PNG Images with Background Transparency
PNG images are useful because if done correctly, they lack the white bounding box of other graphics, they can be used then in design projects where you want to layer one image upon another.
Michael Branson Smith provides this tutorial on using the online photo editor pixlr to take an archival image, and mask out the background to make it a PNG image suitable for the Graphic Gift assignment.
pixlr is rather sophisticated graphic editor that runs completely in a web browser, and has many of the features you expect in a program like PhotoShop, including layers. Even if you are doing a different assignment, this tutorial will show you a lot about using this tool.