Frost is right. How did it get so pixilated in the first place? It's not a jpeg, so unless you saved it as one first before you saved it as a png file, I don't see how we're going to help you.
Also, there's a tutorial, like, up there, pinned, that says how to make things transparent. You'll need a program like photoshop or gimp.
And the sprite, overally, is a bit... I dunno, shady. Can't really tell where one part starts and another part ends, I guess.