Transparent color in Image Editor

Although I *know* I've seen the word "transparent" on one of the colors in the
palette when using Image Editor, I cannot figure out how to set a color to
represent transparent.

Specifically, I want to edit a bitmap and make the background transparent.

The Help file seems to indicate that one color on the palette always displays
the transparent label, but I do not find that to be the case.

Stuart Kohler