This is an additional option for 'TexFace', which uses the alpha of
the UV assigned faces as well as the colour. It appears in material
buttons as a little 'A' button next to 'TexFace', when 'TexFace is
switched on. It's a bit horrible, but no point tweaking that layout in
isolation at this stage.
This image is using texface alpha, with different assigned images, all
sharing the one material:
http://mke3.net/blender/devel/rendering/texface_alpha.jpg
Usually I consider texface (and teaching people to use it for UV
mapping) to be pretty evil, but in some cases, when you have lots of
separate images that you want to control in the one material, it can
be quite handy.