How do I cut out an area and place it on a transparent background?

Im using the http://pixlr.com/editor/ online and im not sure if its even possible on here, but im trying to make the backround or I should say the part around my picture transparent.

Its because the picture is round and my backround is black. Just looks funny when you look at it on the site, black backround screen with a white box around a small image in the middle of it.
Sticks out like a sore thumb.

Thank you for your time.
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