Since your head's a 'test' to see if you could do it I'll just jot down what you need to do to make it work.
(all assumes your using GIMP)
1. Click the LAYER menu -> TRANSPARENCY -> ADD ALPHA CHANNEL
2. When saving save as a .TGA, and untick RLE. Leave the origin set to bottom left.
On another note don't draw heads as a circle - they use the whole square image.