1. If you're using the photo as a transparency map, remember to copy and paste the image into the second of the three windows in the image editor.  The second window is what makes an image act as a transparency map.

2.  In the material editor, go to the little triangle at the tip and choose Blend Transparency

3.  In the material editor, remember to put a dot in the column that corresponds to the image.   For instance, if you have your photo/transparency map in the second space, put the dot in the second column.