Well, John, as with so many other things in Word the answer is a definitive
"kinda"
That's why I qualified my reply.
By the stricter definition transparency is not supported as it would be in a
graphics design or pro DTP program, but the tool I mentioned does allow for
designating *1* color in the image as transparent. The following is as
accurate as I've found so far:
"Note The Set Transparent Color option is available for bitmap (bitmap: A
picture made from a series of small dots, much like a piece of graph paper
with certain squares filled in to form shapes and lines. When stored as
files, bitmaps usually have the extension .bmp.) pictures that don't already
have transparency information. It's also available for some, but not all,
clip art (clip art: A single piece of ready-made art, often appearing as a
bitmap or a combination of drawn shapes.)."
Images which carry transparency (such as Photoshop images with clipping
paths/vector masks) do retain that transparency when properly inserted into
a doc. I believe, though, that if the image is *pasted* in that the
transparent area (background) is converted to white pixels.
The down-side of the Set Transparent Color tool is that *all* pixels in the
image that are the same brightness level as the one clicked will be rendered
transparent - including those within the main body of the image. IOW, not
just the surrounding white space. In some images that can be a problem -
especially if the unwanted background isn't pure white. The resulting effect
is that the subject can end up with holes in it.