Alpha compositing is a technique for combining images by manipulating pixel transparency. It involves storing an alpha channel value between 0 and 1 for each pixel to indicate transparency level. A value of 0 is fully transparent while 1 is fully opaque. This allows images to be seamlessly combined through alpha blending rules. Alpha compositing is widely used for special effects, connecting real and artificial images, and correcting photo mismatches. It has applications in film, television, graphics software, and more.