This is a very common woe: It’s just a little bit tricky but here are some steps that should help:
There are two kinds of transparency in blender, Z-Trans and Ray-Trans, which can be enabled in the “Mirror Transp” panel.
Z-Trans is Z-buffer based while Ray-Trans uses ray-tracing, for Ray-Trans to work you have to have the “Ray” button pushed in the “Render” panel under the render buttons (F10).
- Switch to “Shading” buttons (F5).
- In the “Mirror Transp” panel press either the Z-Trans or Ray-Trans button.
- Set the “A” (for alpha) slider in the “Material” panel to the transparency you want.
Some other notes, you’ll need to enable the “Traceable” button for an object to be ray traced, which is in the “Shaders” panel. Also in order to cast transparent shadows you’ll need to enable them on the objects behind your transparent object by pressing the “TraShad” button also in the “Shaders” panel.
May seem a bit silly doing all that for a simple effect but you can control it alot more to get some interesting effects.
Sorry if that’s a bit jumbled if you can’t get it working let me know and I’ll try to be more clear on a step by step basis.