Why is the alpha channel not working? I was trying to make a really low poly flower, basically using 2D planes and applying textures with an alpha channel (Targa, 32 bit).

However when doing the UV mapping and applying the texture as usual doesn't yield the expected results. The render either shows the image with the alpha being white, or it doesn't show anything at all (an empty/completely transparent square).

I've tried several settings, but without any results. If I drag the "alpha" down to 0, it makes the whole texture transparent which is not what I want. I've tried selecting Z transparency, and also Mask, but nothing. Is there something I'm missing? It'd be nice to know the basic workflow to get it to work.
Enabling Z-transparency and setting the alpha of the material to '0' was correct but you also have to tell Blender that the texture should affect the alpha channel: