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Use masks and alpha layers iMovie 08 Apps
This is a simple video tutorial on how to create masks in iMovie 08 using PNG images created in Photoshop. Essentially, iMovie is tricked into thinking the PNG image is standard text with an alpha layer.

[robg adds: To make sure the hint itself is documented here, these are the basic steps needed to use masks in iMovie '08:
  1. Create a new PNG image in Photoshop (or probably any other image editor capable of creating PNGs with transparency) that includes transparent sections. You can use a black and white mask, removing the white to leave an overlay over a transparent area, or you can cut portions of an image out, leaving transparent areas.
  2. Save the created image as a PNG.
  3. Drag the image from the Finder onto the relevant clip on your iMovie '08 timeline. iMovie '08 will place it over the video clip, and assign it a default length. Modify the length to suit your needs, and you're done.
This worked for me with a very simple test image (solid red foreground with a few random selections deleted), but I didn't try anything more complex than that.]
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