You need to get into using layer masks in PSP7:-
- Show the layer palette (icon with red and turquoise square on the toolbar)
- Start with the background image as layer 1 (default).
- Click Layers and select Duplicate
- Now, save your image as a .psp file (this will keep your original intact.
- Open the alarm clock image.
- Click Selections and select all (or select the item using the lassoo tool.
- Switch to your background image and select Edit, Paste as New Layer.
- Now, move the layer into position on the image.
- Now, click Masks, New, From Image.
- Source should be "This Window" and leave the rest as default (i.e., top selection).
- Now, click Masks, edit.
- Choose the Paintbrush tool and select Black as your colour.
- Start to paint over the alarm clock and all will be revealed.
Choose black to bring the alarm clock into view and choose white to hide the alarm clock.
Repeat the steps for each item (apart from duplicating the background layer) making sure that they are all layers.