Depends on if you are talking about transparency or translucency. Translucency would be like for a window and is set with a face flag on that surface (see the breaking glass tutorial).
Transparency (you just don't see part of the mat) is actually a part of the mat. Black (0,0,0) shows up in the game as totally see through. Black (256,256,256) shows up as black. Just take your mat or bmp with balck in it and, when you convert it into a mat in MatMaster, make sure the translucency option is turned on. It will handle to different types of black for you.
Warning, if you are wanting to make the sky transparent, you will get hom. It has to be adjoined to something.
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