The png format has a lot of depth. IE7's png support is improved [blogs.msdn.com] but still not 100% [libpng.org].
Here's a quote from libpng.org (the second link above)
full alpha support as of version 7.0b1... inconsistent/broken gamma support
handles PNGs with gAMA chunks differently (inconsistently) from HTML and CSS colors, from unlabelled images (GIFs or PNGs), and from PNGs with sRGB chunks (see 7.0b1 screenshots)--apparently uses display-system gamma of approximately 1.93 instead of 2.2 (i.e., colors appear slightly dark)
For many uses this is major progress, but there are still limitations -- especially when combining png graphics with IE filters.