Picasa doesn't automatically include portable network graphics images in your photo library by default. Picasa ignores PNG images in folders you add to your library and won't open individual PNG files in its editor. After enabling PNG support in Picasa, you can view PNG images in your Picasa photo library and open them in Picasa for editing from the Picasa Photo Viewer application. You can also set PNG images to always open in Picasa Photo Viewer.
Open Picasa by clicking "Start," typing "Picasa" and clicking the Picasa shortcut.
Click the Tools menu in Picasa and select Options.
Click the File Types tab at the top of the Options window.
Enable PNG image support by clicking the PNG check box and clicking "OK."
Click the Tools menu and select Configure Photo Viewer.
Click the PNG check box in the Photo Viewer Configuration window to open all PNGs in the Picasa Photo Viewer by default, if desired, and click "OK."
Add PNG files to your Picasa library by clicking the File menu and selecting Add File to Picasa or Add Folder to Picasa. Picasa also automatically adds to your library PNG images in folders it's already watching.
Click the “Edit in Picasa” button in the Picasa Photo Viewer to open a PNG image in Picasa and edit it. This button appears grayed out if PNG image support is disabled in Picasa.
GIF and TGA images are also disabled by default. You can enable them from the File Types tab.