Maine Man,
You are correct. The area surrounding the circle is transparent, as denoted by the checkerboard pattern. The 2 segments inside are not transparent.
To fix this, do the following:
1.Open the image, duplicate the background layer, shut off its visibility and work on the background copy layer.
2. Activate the Magic wand tool. On the tool's option bar, set the tolerance to 32 and check "contiguous."
3. Left click on one inside segment, and hit delete on the keyboard. Press CTRL+D to get rid of the selection outline ("marching ants"
4. Repeat step #3 for the other segment.
5. For demonstration I have cleared one of the segments.
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