It's a .png file, I believe. It allows for all the colors to stay intact, but it also allows for a transparent background. If you had only 16 colors you could use a .gif file, but not for something like this. In Photoshop just make sure the background and whatever you want the DA background color to show through is transparent, and save it as a .png. Hopefully that answers your question (and I didn't miss anything)!