windowless transparent rendering

I remember playing Resident evil 3 Nemesis (release long time ago) and it had this very cool toy that have character from the game (zombie,Nemesis,jill valentie) wreck havok on screen and you can also drag it around.

Can someone suggest me the simplest way to do this?

two method I can think of is

1.Capture the undelying desktop image and use it as rendering background so that it give the illusion that the 3d character has been drawn directly to the desktop

but this going to invole hide/show window between capturing and rendering.

2.Render on black/blue or orther solid color and running some edge detection algorithm to extract 2d point shilluate and use Win32API SetWindowRgn to setthe window’s region to the shape of character’s shilluate

Windows 2000 introduced a feature called layered windows that allows you to directly set the alpha channel on a window. You can see the documentation here:

This is definitely the fastest and most convenient way to do what you want.