how do you make an object clear, such as a glass cup?

Simply reopen the image in blender. Even though I packed the textures, the glass still appears pink. So just reopen the image I included in the file.
Oh, and after you reopen the image, in the UV image editor, go to: Image->Realtime Texture Mapping->Reflection.
Make sure you reapply the image to the object as well.

And if you don’t want to use a texture, you can just set the Alpha to .1 or something and turn on ZTransp

In the material settings, of course.