(ADVANCED BLENDER TUTORIAL)

In order to create transparency without using a texture map, you will need to add an IPO curve to the object.
This is helpful if you want to animate the transparency (or color) over time.

Select your object and open the IPO Curve Editor. LMB click on the ColA attribute. This is the objects Color attribute that specifically controls its alpha value.

Hold down CTRL and LMB click on the grid at O, O. If you need to place it precisely, press NKEY to bring up the numeric editor and change the values manually.
A value of 0 means transparent, while a value of 1 means opaque. The value can be set anywhere between those values, and can be animated by setting more IPO keyframes.

Now go to the Texture face panel (hold the mouse over the object and hit FKEY) and activate Tex. Now activate ObColor. This tells the game engine to use the objects color information. You may need to set values (keyframes) for the ColR, ColG, and ColB attributes if the object isn't the color you want it. Now click Copy DrawMode so all the object's faces receive these settings.

To make a transparent texture mapped object, read Transparent Texture Mapping.