Transparency
Mini Sprite Editor supports single bit transparency using color keying. This means that a single color is set as the "transparent" color and any pixel that uses that color will be ignored by the game engine. Usually the bright fuchsia color (Red=255, Green=0, Blue=255) and is used since it is hard to find in most images, but this can be configured using the ColorsColor Key menu option. The default palette has the bright fuchsia color at the bottom right side of the palette window.

In the editing area, Mini Sprite Editor will show a diagonal pattern where the transparent color would be (assuming a large enough zoom level) and in the tiled preview/animation window it will use a gray-ish noise to simulate a background.