About 6 months ago, I created a custom icon for my Windows Mobile application, FeedFly. I think I used one of those "We'll make your icon for free from an image! It's totally FREE!!!" web sites. I chased that down with a trial edition of an icon editor (it might have been Microangelo) to make a couple modifications.
My icon turned out great, or at least I thought it did until I deployed it to my device. The transparent background wasn't transparent. It was either white (as shown on the start menu graphic below) or this weird smoky gray color (shown on HTC's Home Today Screen plug-in next to the fixed one). I tried opening the icon in several different applications (Visual Studio, Infranview, and even old MS Paint). Each one told me I actually had a transparent background (in more or less words).
Since I'm working on a new release for FeedFly, I thought I'd once again look for a solution to my icon transparency woes. A couple days ago, I stumbled upon IcoFX and installed it to see if it could be of any help. Well, it was.
It turns out that the handy web site I used to generate the icon provided me with a 32 bit color icon along with the alpha transparency included within the original image. Using IcoFX, I converted my icon to 256 color (8 bit) and removed the alpha transparency. After deploying to my device, it is shown correctly now.
On a related note, let me start by saying I realize that the target audience for a tool such as an icon editor is a small slice of the general user population. However, for an operating system that uses icons so extensively, I still can't believe an icon editor is not included in Windows. I'm on a budget, and I can't justify purchasing something like Photoshop just to edit an icon. I'm nowhere near an artist, so I definitely won't make icon editing a habit (I get pretty frustrated as it is), but I do end up fiddling with an icon once every other year it seems (mostly favicons lately).
Finally, this post isn't meant to imply that all the high bit counts won't work for icons (read this for more information), but to hopefully help you avoid some frustration trying to track this issue down. Just make sure your icon is not 32 bit with alpha.