An icon family is a collection of icons of different sizes and color depths (the color depth determines how many colors are used), so that the right icon can be drawn depending on the situation (desired size, monitor setting, etc.). The icon family also includes "masks," which define the transparency of an icon.
Here are the large (32x32) icons and masks for a plain folder icon:
.dmg/Shareware World/Icon Utilities/Icon Machine/Help Files/images/masks.gif)
As illustrated above, there are two kinds of masks. The 8-bit mask can have many different levels of transparency (shown as different levels of gray), and is used only for the 32-bit icon. The 1-bit mask is used for the other three color depths, and each mask pixel has one of two values: opaque (black), and transparent (white).
The 1-bit mask is stored together with the 1-bit (black-and-white) icon, so that icon must always be present.