Starting with version 1.0 beta 17, PinballY is capable of showing videos with "alpha" transparency information embedded in the video, as well as animated GIF files with transparency, and animated PNG files (also known as APNG files) with alpha transparency.
Alpha transparency is probably a familiar concept if you've done any work with image editors. Image formats like PNG can represent partially transparent pixels, so that one image can be superimposed on top of another one, with areas of the background image showing through areas of the top image.
There's a separate kind of transparency used in GIF images, where a pixel color in the image is designated as the "invisible ink" color. All pixels in the image that match the designated invisible ink color are drawn as though there were completely transparent, and all other pixels are opaque. This is less sophisticated than alpha transparency, since it only allows an all-or-nothing kind of transparency, whereas alpha allows for continuous gradations of partial transparency.
Quick answer: transparent videos can be used anywhere videos can be used.
PinballY uses transparent rendering for all videos that contain alpha channel information, regardless of context. Alpha transparency is a property of the video itself, so PinballY simply uses alpha for a video if the video has alpha information in the first place.
This applies to all videos, including the background videos in the playfield window and other windows. However, it's not particularly useful for background videos, because there's nothing "behind" them to show through the transparent areas in the video - just a black background. Any completely transparent areas in a background video will thus be filled with black, and partially transparent areas will effectively look like they're shown at reduced brightness, as they'll be mixed proportionally with the black background.
Transparency is therefore really only useful for videos that are layered on top of other display areas. Currently, PinballY uses layered videos in the following contexts:
The most popular current "video" format with transparency support isn't really a video format at all: it's the GIF image file format. The widely-used PNG static image format also has an unofficial animated version, known as APNG.
GIF and APNG files allow a simple form of animation using a series of image frames that can be played back sequentially on a timer. Most people don't consider these true video formats, since they don't support audio tracks and they don't have any sort of motion-based compression. But that same simplicity makes them great for storing short animations, such as animated icons and short video loops. Animated GIF is widely used on the Web for just those purposes. APNG isn't as widely used, since it's newer and it's not an official standard, but it was designed explicitly as a replacement for animated GIF and has pretty much the same capabilities. APNG also has the same advantages that the basic PNG format has over GIF, notably full alpha transparency (GIF only has "color keyed" transparency) and 24-bit color (vs. GIF's 8-bit indexed palette scheme).
GIF and APNG both support transparency, so they can be used for animated overlays - just the sort of thing you'd use alpha-channel video for. APNG's transparency support is better, in that it provides full alpha transparency, which allows smoother blending at the edges.
PinballY supports animated GIF (as of 1.0 beta 17), including transparent animated GIFs, and APNG (as of 1.1 beta 4). You can use an animated GIF or APNG anywhere a regular still image can be used. Animated PNG files are detected based on the contents, not the filename suffix, so you can use either the standard .png suffix or the alternate .apng suffix with these files.
It might seem a bit strange, but note that all GIF files and all PNG files are still considered image files in PinballY, even when animated. They're never video files. You probably won't notice that distinction for the most part, but it can be important when you're deciding where to store a particular media file. The rule is really simple: if it's a GIF, PNG, or APNG file, treat it like an image file. Always put GIF, PNG, and APNG files in the PinballY media folders designated for image files; never put them in video folders.
As of this writing, alpha channel support in the standard video formats is quite limited. It's not supported at all in the most common formats and codecs, including MP4 and H.264. (That's not because of PinballY limitations or libvlc limitations - it's inherent in the formats.)
The only video file formats that currently support alpha appear to be MOV (Apple's QuickTime video format), FLV (Adobe Flash Video), and AVI (Windows). However, that's hardly the full story, because you also have to use a codec that supports alpha. Here's a list of what works now:
Note that "PNG" in this context is a video codec, not a file format. (It does happen to use the PNG image format to encode each frame within the video, which is why the name is reused in this somewhat confusing way.) A PNG-encoded video stream can be stored in an AVI or FLV file. You can encode videos this way with ffmpeg, for example.
PNG and QTRLE are usable only for very short clips, because they use lossless encodings that result in extremely poor compression ratios compared to what we're accustomed to with modern video codecs like MP4 or H.264. So at the moment, the ProRes YUVA 4:4:4:4 format is really the only good option for full video. Fortunately, ProRes seems to be a high-quality format with great alpha support, so there's at least one good option.
This list might eventually grow, and it sure seems primed for growth given how sparse it is, but I actually don't see it growing quickly or soon. Alpha channel support in video seems to be a difficult technical problem that's of little interest to the video engineering community. It doesn't seem that anyone except the Apple ProRes group has given it much thought. (That makes ProRes a curious anomaly: computer technologies usually develop incrementally, with a series of false starts and half measures before a good solution appears. But in this case, it seems like no one else was even trying, and along comes Apple to just solve it for real.)
Even though alpha channel support in video formats seems to be a work in progress that's barely begun, the concept of motion overlays is hardly new. It goes back to film-based special effects. Traditionally, layered film and video composition was handled with an entirely different process, called chroma keying. This is also known as the "green screen" or "blue screen" technique, because it's widely used in film and video productions to shoot a live subject against a green or blue backdrop that's replaced in the final editing process with a special effects background.
In chroma keying, there isn't a separate "alpha" channel that records which pixels are opaque and which are transparent. Instead, you simply treat all pixels that match the key color as transparent. Every pixel that matches the key color is transparent, and the rest are opaque.
The reason I mention chroma keying is that it's been used for a long time in film and video production, so there's a lot of stock footage on the Web that uses this technique. If you're looking for material to use for overlay videos, you'll probably find lots of chroma-keyed videos and few videos using an alpha-channel format. But PinballY can only use alpha-channel videos, so chroma-keyed videos will have to be converted. That's something that FFMPEG (the popular open-source video converter program) can accomplish. Here's a fairly simple procedure you can use:
Note that there are two extra parameters in the chromakey section, following the hex RGB color value, which you might also want to play with to optimize the conversion. The first 0.01 value is the "tolerance" for matching the key color. 0.01 is 1% tolerance, meaning that the color has to match almost exactly. This works well for computer-generated videos with perfectly uniform backgrounds, but material with a live subject against a green screen might have a lot more variation in the background. Adjust this upwards if areas of the background remain opaque in the converted video. The second 0.01 value sets how much of a transparency ramp is used to adjust pixels that are close to the background color but not exact. Again, a small value like .01 is good for computer-generated material; this will result in sharp edges around the subject. A higher value will make the edges appear softer by making them partially transparent, which might look better with live subjects. But too high a value will make the subject look too transparent, so you might have to experiment to find the right value for a given video.