PNG- Usually if you look up your picture and then add png to the end, it has a transparent background. Make sure it has free usage, though.
It's a malware, and it basically let's the person/hacker/culprit get information off your computer without the owner of the computer knowing that the person is doing it. It's often used to find keystrokes, passwords, online interaction, and other personal data.
False, the storage is being accessed from the cloud which can only be accessed through an internet connection.