Adobe Photoshop has professional tools to cut out objects from images. In many cases, setting a transparent color in PowerPoint will do.
In PowerPoint 2007:
- Select the image
- Go in the "Format" ribbon
- Click "Recolor" all the way to the left
- Choose "Set Transparent Color" at the bottom of the menu
- Click the color that you want to be transparent
The cut out is not perfect and it works best with images with a sharp color contrast. I mostly use it when working with a stock image from iStockPhoto that is an isolated object on a white background. Making the white background transparent gives me more design freedom in PowerPoint.
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