Uhh help

Okay i was follow this tutorial about coloring images in photoshop when i came to my problem, the tut tells me to click on the preserve transperency button when i dont have it!? My photoshop version is 7.0.1 (i got the update)

Anyways heres the pic from the tut

There is a list of locks. It's the first one. They changed it into a picture. Square one that looks like the transparent layer.

it is ze button zat looks like a checkered square