The script finds all instances of images on a page with a .png extension and replaces them with a <SPAN> (or <DIV...forget which one), sets the images as the background image for it and then adds a CSS alpha filter. Since the filter only works on IE, which is the only browser needing this hack anyway, it is skipped for other browsers.
The bad news is that if your PNG images are being included in the page through CSS, this or any other script that uses a similar approach (most do), is not going to help. The good news is that in this scenario you don't need the Javascript. Instead you can apply the filter directly to the style definition. For example, if you have the following attribute defined:
background: url(someimagefile.png);
...you can add this:
filter: progid:DXImageTransform.Microsoft.AlphaImageLoader(src='someimagefile.png',sizingMethod='scale');
Other browsers will ignore the filter attribute, but IE will use it to render the alpha channel correctly.
If you do end up using the script to also deal with images embedded in the page using <IMG> tags, one things you should know is that a DotNetNuke skin is only an HTML fragment...it should only include the HTML code that appears inside the <BODY>...</BODY> tags. Therefore, a <HEAD> element is a no-no for a skin. You can include the script by entering the script block directly in the ascx using < script > tags. If you place your script in the same folder as the skin, the value you would use for the "src" attribute of the script tag is "<%= SkinPath %>yourscriptname.js"
Nik