If you are trying to copy a transparant image on to another image, you might assume that you should apply the ImageAlphaBlending function to the image that has the transparancy, the source image. In reality, you must apply the ImageAlphaBlending function to the destination image. Basically it's saying, "make the specified image respect transparancy".
Here's a real world example. Suppose you want to put your logo on the upper left corner of a photograph. Your logo is a PNG with transparancy, and the photo is a JPEG. Here's what you would do:
<?php
$photoImage = ImageCreateFromJPEG('photo.jpg');
ImageAlphaBlending($photoImage, true);
$logoImage = ImageCreateFromPNG('logo.png');
$logoW = ImageSX($logoImage);
$logoH = ImageSY($logoImage);
ImageCopy($photoImage, $logoImage, 0, 0, 0, 0, $logoW, $logoH);
ImageJPEG($photoImage); ImageDestroy($photoImage);
ImageDestroy($logoImage);
?>