I take it form you post that you have two images one of the tree and a black and white image to use as the alpha mask.
On the Merror Transp tab Turn on ZTransp.
Load the Alpha image as the first texture.
On the Map To Tab turn Col off and Alpha on.
On the Materials Tab Move Alpha to 0.
Load you tree image as you second texture.
TIFF is a flexible bitmap image format supported by virtually all paint, image-editing, and page-layout applications. Also, virtually all desktop scanners can produce TIFF images.
The TIFF format supports CMYK, RGB, greyscale, Lab, indexed-colour, and bitmap files with alpha channels, <i>however layout design applications do not recognise all alpha channel information.</i>