Alpha Channels, in a nutshell, are Layer Masks that you can put aside and use again later in the same document. While regular layer masks are only for the individual instance where you applied them, Alpha Channels can be used again and again.
Our goal here is to make an image residing in a single layer transparent. To accomplish this, we will create an Alpha Channel.
First: open a document in PS. Here we have the Adobe logo.
Click the Window drop-down menu, then click Channels.
Click the Blue Channel. In this case it is closest to black as opposed to the Green or Red Channels. Black normally filters out ALL colored pixels trying to shine through the image on the Layer itself.
Duplicate the Blue Channel by dragging it onto the Channel Palette’s New Layers icon. Then select the duplicate channel, called "Blue Copy". (This duplicated channel is the beginning of your Alpha Channel.)
Image / Adjustments / Levels
Pump up the Black to whatever level you like. Click OK.
Click Image / Adjustments / Invert
Results so far...
CTRL + Click the Alpha Channel icon. You'll see the dancing ants.
Select Base Layer in the Layers Palette and click the Add Layer Mask button. This will load the Alpha Channel into the Layers Palette.
A new Layer Mask is added to the Layers Palette.
Voila! Your Adobe logo is now transparent.
The new mask (in the LAYERS palette and where colored black) prevents all white in the entire original image from shining through to your eye. At the same time, the new mask (in the LAYERS palette and where colored white) allows all red from the original image to shine through to your eye. "Black conceals, and white reveals!"
The crucial action that made it look so cool was the Invert. If you hadn't of done that, your result would be so...
Without that Invert, your Alpha Channel (pre-inversion) would be colored white for the logo "A", and "Adobe" at the bottom and the triangle shapes on the left and right would be colored black. (Compare with the proper result above.) So, when you load the non-inverted Alpha Channel into the Layers Palette, "Adobe" and those triangles are transparent. Why? "Black conceals and white reveals!", the old rule for Layer Masks.
OK. FUN! BUT WHAT THE HECK DID I JUST DO?
You see color. A bright red Adobe icon. PS does not see color. PS sees that red as a composite of black and white pixels.
Pixels are the individual units of color in PS. They're the molecules in the PS body.
PS sees any color pixel only as a mix of black plus white. These mixes come in three. modes: Red Green and Blue, the primary colors of our universe. Any pixel's black and white mixture is assigned 3 numbers. (Pure black is R=0, G=0, and B=0. Pure white is R=255, G=255, and B=255. Midpoint Grey is R=133, G=133, and B=133.) That number combo is all PS sees, and is happy seeing. You, on the other hand, get all emotional about how the color affects your life and your feelings.
If you go back to your original image and open the channels palette, you can click each individual palette. This will show the pixels that belong to that palette. (Clicking on the RGB channel at the top will keep the image in full living color.) If you are viewing the Red Channel only, the lighter the spot on the image, the more color red will show through in full living color. This is best understood by looking for a single big white spot while in the Red channel, and then clicking on the RGB channel to see red appear in the same spot, then clicking on the Red channel again, then the RGB channel again, back and forth a thousand times to see red appear and disappear.
It follows that the darker the spots on the Red channel, the less red will show up in full living color. Keep clicking back and forth till your mind is wrapped around this concept. It can take a while. You'll get it.
The same concepts apply for Green and Blue channels.
Why did we make a copy of the Blue Channel for our Alpha Channel? Because it was the darkest one of all for this particular image and therefore easiest to use as that final Layer Mask. "Black conceals and white reveals!"
Remember, in Layer masks in general, black filters out color from shining through to your eye. We made a black filter the shape of the Adobe icon, that means NO color will be shining through to your eye. Hence, a transparent Adobe icon.
Best of luck,