Open a JPEG image. Select the eraser tool and set it to a large size. Erase some stuff and note that the background changes to transparent. Now use rectangle select, and select an area of the image that contains some transparent stuff and some opaque stuff. Begin to drag the selection. Note that in the transparent parts you erased, you can see behind to whatever is underneath that portion, implying that when you drop it, it will merge the image. However, when you do drop it, those transparent portions change to white and obscure whatever was underneath them.