Transparency is not really a new option, but in the early days of desktop publishing, such special effects as transparent overlays and soft drop shadows required software such as Adobe PhotoShop to export flattened layers and transparency to EPS or TIFF files.
Transparency is introduced into a layout when an object's opacity is changed; when a drop shadow is introduced; when feathering is is used; when blending modes are employed; or when any of the effects in the transparency palette are introduced.
Transparent content in files can either be live or flattened. Files that contain live transparency can be opened in the originating (native) software and the transparent objects can be modified. Native software that supports live transparency includes PhotoShop, native Illustrator, Illustrator EPS, native InDesign, Quark XPress (version 7) and Adobe PDF 1.4, PDF 1.5, PDF 1.6 and PDF 1.7.
Flattened transparency occurs when a file is exported to a non-native format. Flattened file formats include PostScript, EPS, DCS, Adobe PDF 1.3, GIF, JPEG, BMP, and TIFF images created with PhotoShop prior to version six. Files created using Acrobat Distiller do not contain live transparency regardless of the PDF version selected. Transparency is flattened when a PostScript file is generated. Note that the Illustrator EPS format could contain live transparency as is actually comprises of two files - one native Illustrator format that only Illustrator can open and the other in an EPS format that other applications can import/place in which the transparency is flattened.
At the time of writing (May, 2007) most installed RIPs are PostScript devices. As discussed above postScript does not support live transparency. Therefore, flattened transparency is required. Some RIPs flatten live transparency prior to RIPping, others require only flattened files to be presented. This year the Adobe Print Engine was introduced upon which many future workflows and RIPs will be based - but for now most PDF specifications will call for PDF 1.3.
Headley Brothers PDF specification recommends that pages are printed to PostScript and distilled to PDF using Acrobat Distiller to PDF 1.3. However, designers often prefer to export to PDF. Either way, the PDF 1.3 specification requires transparency to be flattened. The flattener settings can be saved in a transparency flattener preset (Edit>Transparency Flattener Presets). You can then apply these settings when you print or export to PDF 1.3 (Acrobat 4) or even EPS formats.
>> About flattening