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How do I use it?

And on that subject, how in the world do I make anything transparent?

What do you mean? There is no such thing as a transparency layer, there's layers with transparency, there's transparency masks, but not transparency layers?

Edit: also, use the eraser, unless you're using exr, in which case you first go into image->image background color and set the background colour transparent there.
Edit2: or use the color to alpha filter under filters->color. You can use this to make a specific colour, like white, completely transparent.