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This is a neat trick that allows one some control over the layout of his (or her) text when writing HTML. As you may know, HTML is a little unkind to whitespace, only drawing a single space between words regardless of how many spaces, tabs or newlines you write in the source. This is a particular pain if you want to indent your text without having to mess about with <blockquote>s. Simply create a GIF image of a single pixel in size (1x1) and set that pixel to the transparent colour. Then using the width and height attributes the invisible image can be set to take up as much space as required allowing you to put giant gaps between words or indent your text by precisely 17 pixels or 10% of the available text area. This can also be used to position other (visible) images and so on.

If the proper optimisations are used such a GIF need only be 85 bytes in size, which though far greater than the single byte for each space/tab/newline it replaces is really pretty small. Besides it's only loaded once, cached and then the cached copy used for the rest (with any modern browser anyway). Paint Shop Pro 7 has a built in image optimiser which is very good at helping you create teeny weeny gifs.

Also the pixel needn't be transparent. One could use exactly the same technique except with a black pixel for creating horizontal or vertical lines (or big fat black boxes).

Of course all of this assumes you're hardcore enough to give a toss about HTML. WYSIWYG yuch.