HTML Background Colors and Transparent Background Images

If the background image is a transparent GIF, the page is rendered so that the background color is "underneath" the image, and the color peeks through the transparent parts. Consider this (slightly obnoxious) background image:

background image with transparency test image

The circles in the image are the only parts that aren't transparent. Now let's put that image on a page with a blue background:

This Code Makes This 
<BODY 
BGCOLOR="#AAAAFF" 
 BACKGROUND="/graphics/bgtest.gif" 
 TEXT="#000000" 
 LINK="#0000FF" 
 VLINK="#FF66FF" 
 ALINK="#FF0000" 
 >
this page

<BODY TEXT="..."> >