This video walkthrough, complete with voiceover explaining actions, and the reasons behind them takes you from the very beginning, with the source picture:

through the use of a layer mask to cut-out the image, all the way through to the end result of the icon, including all optimization:


You can either:
1) Download Here, Right-click and Save (14mb, .MOV file, 1280x800 pixels)
2) View In Your Browser (Flash required)



If anyone would like to instead have the .AVI version, it is split into two halves, here (103mb, .AVI file) and here (158mb, .AVI file).


If you have any questions, feel free to contact me.