I don't use PSP - so I'm not sure but it may have something to do with the alpha channel. Here's a snipit from the PSP FAQ from the Computer-Scrapping group

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What is a .png element and how do I open it?

A .png element is an image with a transparent background.
To open a .png element in PSP go to File-Open.
Your element will have a background.
To elimate the background go to Masks-Load from Alpha Channel.
Now you should have a transparent background.
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