The transparent keyword represents a fully transparent color. This makes the background behind the colored item completely visible. Technically, transparent is a shortcut for rgb(0 0 0 / 0%).
To prevent unexpected behavior, such as in a <gradient>, the current CSS spec states that transparent should be calculated in the alpha-premultiplied color space. However, be aware that older browsers may treat it as black with an alpha value of 0.
The transparent keyword wasn't a true color in CSS Level 2 (Revision 1). It was a special keyword that could be used instead of a regular <color> value on two CSS properties: background and border. It was essentially added to allow developers to override an inherited solid color. With the advent of alpha channels in CSS Colors Level 3, transparent was redefined as a true color. It can now be used wherever a <color> value can be used.