Alpha Transition is being marketed as one of the major new features of Final Cut Pro 7. It allows you to use a third clip as a transition between two existing clips. It uses the transparent parts of the transition clip, so that makes it an alpha transition.
This Alpha Transition effect is implemented in FxScript, Final Cut’s plugin scripting language. Which, as the language hasn’t changed, means that the effect also works in earlier versions. Probably back to version 5.1.
So if you know your version 7 project might need to be finished on a 6.X system, you can export as XML as usual, and use the Alpha Transition plugin by installing it on the older system.
Note that Apple’s license agreement may not allow you to do this (even though the transition is implemented using mere 5.62K of FxScript), but if you use 6 and 7 on your computers and 7 was upgraded from your copy of 6, you are probably bending (if not breaking) the rules already.
It should also work in Final Cut Express, but as I don’t have a copy, I can’t confirm that.
To learn more about the effect, check out the tutorial on the Ripple Training site:
Apple also supply free alpha transition movies on the Final Cut Studio resources page: [760MB Zip file]