Alpha Compositing is a technique used in computer graphics to combine images or layers while considering their transparency levels. Each pixel in an image has an alpha channel, which indicates how opaque or transparent that pixel is. This allows for smooth blending of images, creating effects like shadows or highlights. When two images are composited, the colors of overlapping pixels are mixed based on their alpha values. For example, if a pixel is 50% transparent, it will blend equally with the background color. This process is essential in applications like photo editing and video production to achieve realistic visual effects.