Alongside red, green, and blue, an image can carry alpha: how opaque each pixel is. Compositing reads it to stack layers, and everything from interface elements to VJ overlays relies on it.
Video mostly drops alpha in delivery codecs, which is why performance formats matter: HAP Alpha and similar carry true transparency, letting content shops sell overlays that composite without keying. The alternative is manufacturing alpha live via chroma or luma keying.
Premultiplied versus straight alpha is the classic gotcha: mismatch them and edges fringe dark or bright. When a clean overlay grows a halo in the mixer, that mismatch is almost always the culprit.