The Button
Below you will find a number of examples of both buttons and graphics with drop shadows applied to them.

A button saved as a transparent GIF exhibits blockiness around the edges behind any background that isn't the same color as it's outline.

The button saved as a PNG and displayed against the same backgrounds as the previous example. You must be using either Netscape 6 or Internet Explorer for the Macintosh for this graphic to display properly.

For those not using Netscape 6 or Microsoft Internet Explorer for the Macintosh here is a standard GIF displaying the buttons as they would appear if your browser provided full support for PNG.

A closer look reveals how different the edge of the button as transparent GIF is from the button as PNG with Alpha Channel.