You need to set the PorterDuff mode on a Paint object:
mPaint.setXfermode(new PorterDuffXfermode(PorterDuff.Mode.SRC))
and draw with Color.TRANSPARENT
Also see this thread in the Android developer group:
http://groups.google.com/group/android-developers/browse_thread/thread/5b0a498664b17aa0/de4aab6fb7e97e38?lnk=gst&q=erase+transparent#