How to overlay a picture with transparency overr a movie clip? I added a movie clip into the VSE and also a picture which is a cut out head of a gorilla with the rest being transparent (png file). 

However, when I hover over both clips with the timeline marker, one can not see through the transparent parts onto the movie clip below.

(p.s. what is the best way to decrease the size of the gorilla?)
Here is the asked answer:

in comments above I suggested a method in less than 15 words, but there is also another way that could be even faster or simpler, so this answer will be double:

anyway, you start from this situation, where you have an image with transparency and an underlying video, and you wish to overimpose the image to the video using that transparency.




method 1: set the image blend type to alpha over


with the image strip selected (RMB) in the "properties" panel (press N to show/hide) there's a "blend" type selector, by default set to "replace". Set it to "alpha over", done.





in this case you can use the slider below "blend" to set (or animate) the opacity.




method 2: add an "alpha over" effect strip


with both the video and the image strips selected  (shiftRMB) , add an effect strip "alpha over". Done.





in this case, to set the opacity, you can select the effect strip, and in the "properties" panel (press N to show/hide) unset the "default fade" checkbox, and then set (or animate) the "fade" you wish from that.