Most pictures are saved as jpg or jpeg files. (The file will be called something like image.jpg or image.jpeg on your computer.) The shape of the picture will always be a rectangle if it is a jpg file.
A png file does not have to be shaped like a rectangle. If you wanted a picture of a star but didn't want it to look like this (with the white background):
To add your picture without having to trim it down to the right size, you could place it behind this frame and the header would cover up the extra space on your picture and the main part of your picture would show up through the hole I cut.
This is also especially helpful on frames like this where it would be hard to cut your picture down to an oval:
I will continue to save my headers as both jpg and png files because I know not everyone places pictures in these headers.
When you are trying to decide which image to use, remember that the first header I post will be a jpg (the rectangular one) and the second header will be a png (the cutout one).
For more detailed instructions on how to do this go to http://blogdesignsbydani.blogspot.com/2010/12/how-to-place-your-picture-in-header.html.
***If you want a header to go with one of my backgrounds, be sure to leave me a comment or email me. I'll make one and post it on the blog!