How can I get a transparent XTerm?

The wisdom of this is suspect; let's be real, the purpose of an xterm or its equivalent is to be legible, and transparent backgrounds on such a thing hurts legibility. But if you really want to use such a thing, be our guest.

Use Eterm, the terminal emulator from Enlightenment, can be found at http://www.eterm.org.

Before you ask: yes, Eterm is Enlightenment's terminal emulator, and no, you don't have to be running Enlightenment to use it. But if you're going to go for this particular shade of leetness, you might as well waste as much CPU time and space as you can, and run Enlightenment exclusively.