Image background difficulty

I have used Photoshop7.0. I have tried to get a transparent background on an image. I have the image surrounded by the checkerboard. But when I placed it into InDesign, it has showed a white background. Can anybody tell me what I do now? :confused:

What image format do you save it to?
It has to be .png of .gif format to be transparent. And .psd of course.
Or do you simply copy and paste it into inDesign?