This is a photoshop action which converts the active layer (the one you have selected) into an alpha channel for your 4-channel adventures.
If you're not familiar with using photoshop actions, you'll find a great guide on Greater Than Gatsby.
Some instructions specific to this action:
- Install the action (guide in the link above)
- Make a new layer containing what you want to be the fourth channel
- Make sure you have that layer selected in the layers window
- Go to Window > Actions to open the actions panel
- Select the 'ConvertLayerToAlpha' action and click the play button on the bottom of the Actions panel.
- Your layer should be hidden now, and if you go to Window > Channels you will see a channel called 'Alpha 1'. Success!
- To make sure you save your image in a way to preserve the alpha channel in a way that sims 3 can read it, make sure your dds settings are 'DXT5 ARGB 8bpp | Interpolated Alpha'.
Best of luck with your creations!