I don't know exactly about PSP, but Alpha Editing is done in a 'channel'. The usual channels in a image is 'Red' 'Green' 'Blue' (RGB) but in skins, there is an aditional channel called 'Alpha 1'. If there is no channel named 'Alpha 1' you will have to make one. And most important about skins - NEVER 'Flatten' the image, that will remove all Alpha - and you will have to redo it.
In the Alpha Channel ('Alpha 1') Black is changing (Either removing parts of the skin totally, 100% transparency, or making areas TC - all this depends on the model.) while White stays normal.. the whiter a part is the closer to the actual skin it is - but for the parts that has no TC option, any shades of black will remove the part entirely - this means that if you are editting a spot which will be TC in-game (or in a viewer) the darker black you have the stronger will the TC be, if you have say 50% black the actual skin will shine trough, making it possible to shade the teamcolor.
But as I mentioned earlier - I use Photoshop only.. so I wouldn't know exactly what to do in PSP.
