Adobe Photoshop has professional tools to cut out objects from images. In many cases, setting a transparent color in PowerPoint will do.
In PowerPoint 2007:
  1. Select the image
  2. Go in the "Format" ribbon
  3. Click "Recolor" all the way to the left
  4. Choose "Set Transparent Color" at the bottom of the menu
  5. Click the color that you want to be transparent
The cut out is not perfect and it works best with images with a sharp color contrast. I mostly use it when working with a stock image from iStockPhoto that is an isolated object on a white background. Making the white background transparent gives me more design freedom in PowerPoint.