transparent image

I'm trying to make a transparent image( watermark) for the background on my webpage. How is this done?

you'll need to make it a gif with a specified color as transparent. That color is
normally the area directly around the visible part of the image.

Are you using photoshop?

I have photoshop 7, I want to use the whole photo of the building as the transparent image

I get the feeling that all you are needing to do is make the whole picture your selection and then simply reduce the opacity to the desired level, save for web maintaining transparency. You'll need to save it as either a gif or png file to maintain transparency.