Using the New Alpha Transitions in Final Cut Pro 7
The new version of Final Cut Pro has some really cool new Alpha Transitions that use animated mattes to move from one clip to the next. But you first actually have to go to the Apple website to download the new alpha transitions, which are free. Once you have the Alpha Transitions installed on your computer, the possibilities are outstanding. 
Here's how to create an alpha transition:
Import the Alpha Transitions folder into your project in the Browser window.

When you are ready to put an Alpha Transition into your sequence, you must first go to your Effects Tab > Video Transitions > Wipe > Alpha Transition. Drag and drop the Alpha Transition between your two clips where you want to see the transition.
Notice you're not done at that point; this step creates kind of a "hole" where you'll need to drop more elements into. If you've rendered at that point, you'll notice your transition will look like this: Place clips into clipwells
Back in your Browser, notice when you twirl open those Alpha Transitions, each one is made up of 3 elements, Clip, Clip Alpha Matte, and Wipe Matte. In your Timeline, place your playhead on the Alpha Transition, double click on it to open up the Transition Editor. Now notice the 3 clipwells labeled, Clip, Clip Alpha Matte, and Wipe Matte; these are your drop zones for the 3 elements you will drag over from your Browser.
Once all 3 are applied, render your transition and watch the magic! Play around with them and experiment, you'll be sure to find a new favorite! My personal faves being Sparkles, Lens Flare, and Circle.
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